Morning Report: 24 March 2015

24th March 2015 By: Ranko Berich

GBP Sterling resisted any depreciation against USD yesterday but did weaken against euro, ahead of a day of headline releases for all three currencies today. The Confederation of British Industry released the results of its Industrial Order Expectations survey for April. The index tracking expectations fell to 0, indicating that on the whole no growth is expected in order volumes. This is a worrying sign for the manufacturing industry, but not necessarily for the UK economy as a whole which remains dominated by the services sector. Today’s data will be utterly crucial for sterling: the Consumer Price Index is due for release at 09:30 GMT. The headline Consumer Price index is expected to deteriorate further from the 0.3% year on year change reported in February, although the majority of the fall will be due to lower fuel prices. More important to watch will be Core CPI, which excludes fuel and other volatile items and is a better gauge of underlying price pressure.

EUR The euro was fighting back against several months of weakness with vigour yesterday, and the slight rally seen last week began to pick up steam. Little fundamental data was released, although negotiations continued between Greece and Germany on the topic of Greece’s bailout debt. Today will see the release of multiple Purchasing Managers Indices for the eurozone. PMI figures are released as indices that track the level of business activity reported by survey responders, as well as the outlook for future business. French PMI figures have already been released, with the Manufacturing sub index remaining in negative territory while services remained positive. German PMI figures will be released at 08:30 GMT and those for the eurozone as a whole are out at 09:00.

USD Yesterday saw more weakness for the US dollar, ahead of today’s important data releases. The dollar’s recent weakness belies the fact that its fundamentals remain quite strong, and that the Fed, despite last week’s Federal Open Market Committee being perceived as dovish, is still likely to engage in rate hikes this year. This was underlined by the FOMC’s Stanley Fischer, who gave an upbeat speech at the Economics Club of New York and said that it was widely expected the Fed would hike rates this year. Fundamental data remains the key determinant of Fed policy, and so today’s release of the Consumer Price Index at 12:30 GMT will be all the more important. Later in the afternoon the House Price Index will be released at 13:00, followed by the Manufacturing Purchasing Managers Index at 13:45.

CAD CAD continued to rally yesterday, despite a lack of fundamental data releases. The drought of CAD data continues today, meaning that developments elsewhere and momentum are likely to continue to dictate trading for now.

UK news

  • Guardian. UK exports orders hit by sterling strength and euro zone crisis: CBI industrial trends survey is the latest piece of evidence to suggest that the economy is growing less quickly than in the second half of 2014.
  • Reuters. Cameron says won’t seek third term in power: Prime Minister David Cameron on Monday ruled out seeking a third term in office if he won a second mandate in a tightly fought national election on May 7, saying it would then be time for a new leader of his right-leaning Conservatives.
  • Reuters. UK scheme to promote alternative lenders to be running by 2016: A British government scheme requiring banks to refer small firms rejected for loans to alternative finance providers should be up and running by next year, the managing director of the British Business Bank said.
  • BBC UK. homes to have debts of £10,000 by 2016, says PwC: The average UK household will have unsecured debts of £10,000 by the end of next year, according to accountancy firm PricewaterhouseCoopers (PwC).