Morning Report: 24 September 2015

24th September 2015 By: Ranko Berich

GBP Sterling traded flat overnight after weakening during yesterday’s session. Although no data was released, Ben Boardbent of the Bank of England gave a speech on the labour market that did shed some light on his views regarding the UK’s recent lack of inflation. In Broadbent’s view, the fall in productivity seen during the recent labour market recovery is due to compositional effects in the work force. Much of the recent fall in unemployment was caused by a surge in low skilled, low paid workers. The average output per hour worked in the economy fell, restraining wage growth, and, therefore, prospects for inflation. Today at 09:30 BST, the British Bankers’ Association will release its Mortgage Approvals data for August.

EUR After weakening through Monday and Tuesday’s sessions, the euro found a bottom yesterday and has rallied somewhat since then, helped along by some firm survey data. Markit’s Purchasing Managers Indices were released for France, Germany, and the eurozone as a whole. Surveys for the manufacturing and services sector showed modest but steady growth across the eurozone’s core economies. Notably, French Manufacturing PMI rose back above the 50.00 level that indicates growth in the sector. The modest but still encouraging data gave the euro a boost, which was further extended when Mario Draghi did not give any firm indication of intentions to ease monetary policy further during testimony to European Parliament. While the European Central Bank President did reserve the right to do more Quantitative Easing, it was “too early” to determine if this was necessary, and the ECB’s baseline was that no further QE would be needed. Today’s most important release for the euro is German IFO Business Climate data, at 09:00 BST.

USD The dollar’s recent upwards trend came to a halt against GBP and EUR yesterday. Markit’s Manufacturing Purchasing Managers’ Index was unchanged from last month, indicating stable expectations of growth among the businesses surveyed. This afternoon has a busy US data calendar, beginning with Durable Goods Orders 13:30 BST alongside weekly Unemployment Claims. At 15:00 New Home Sales will be released, and Federal Reserve Chair Janet Yellen will speak at 10:00 BST.

CAD CAD weakened yesterday off the back of poor retail sales data, and did not manage to rally off the back of shrinking crude oil inventories in the United States. Although Retail sales grew 0.5% in July, the Core Retail Sales measure, which excludes automobiles and is more widely watched, changed 0.0% in July. This is a disappointing result for the economy, which needs an increase in consumption if it is to meet the Bank of Canada’s optimistic recent growth expectations. Crude oil prices got a temporary boost yesterday when Crude Inventories in the United States were reported to have shrunk for the second week in a row, but the euphoria quickly fades and crude dropped to Tuesday’s lows.

UK News

  • FT. Bank of England’s Ben Broadbent says wages are on rise: Britain’s move to a lower skilled economy is beginning to unwind, helping to boost average real wages, says the Bank of England’s deputy governor.
  • Reuters. Car production rebounds in August after early shutdowns: British car production leapt by almost 41 percent in August compared with the same month last year, bringing output in the first eight months of the year to over 1 million for the first time since 2008, an industry body said on Thursday.