Morning Report: 26 March 2015
26th March 2015 By: Ranko Berich
GBP Sterling continued to hold fast against USD yesterday but slipped further against the resurgent euro. The British Banker’s Association released its measure of Mortgage Approvals, which showed a slight increase in monthly approvals. Today, Retail Sales data will be released at 09:30 GMT, together with the latest Financial Policy Committee Statement from the Bank of England. The FPC assess financial stability risks to the UK economy and as such the report is not likely to be a major market mover, but may be relevant for sterling nonetheless. A press conference will be given by Mark Carney, Governor of the Bank of England, in his capacity as FPC Chair at 17:30 GMT.
EUR The euro’s rally continued yesterday and this morning. Since the week ended 13th March, the euro has rallied an impressive 5.5% against the dollar. Although the future of the currency pair and the euro is far from clear, one thing is certain: this is an extraordinarily high volatility environment in FX markets. Yesterday saw the release of German IFO Business Climate survey data, which showed an increase in optimism amongst the surveyed business leaders. The IFO survey is the most respected opinion survey on the German economy, and the strong performance here bodes well for the eurozone’s economy as a whole. Today at 09:00 GMT, M3 Money Supply for the eurozone as a whole will be released.
USD The United States dollar appears exceptionally sensitive to bad news at present, and the last 24 hours of price action underlined this point. The dollar has weakened noticeably after Durable Goods Orders data for February disappointed expectations. Orders fell 1.4% month on month, suggesting that the dollar’s strength over the last 6 months may be weighing on manufacturers. Durable Goods are somewhat of a bellwether for the economy, as consumers may be less willing to pay for durable goods if they believe the economy will perform poorly in future, and as such yesterday’s results are a particularly concerning development for USD. Today at 12:30 GMT, weekly Unemployment Claims will be released.
CAD The United States dollar’s loss was the Canadian dollar’s gain yesterday, and CAD sellers are now looking at some of the most favourable conditions they have seen this year. The Bank of Canada’s Timothy Lane gave a speech yesterday and stated the obvious: falling oil prices were weighing on the Canadian economy, but an improvement in growth in the United States has the potential to help. Either way, monetary policy is likely to remain loose for the time being. Today, BoC governor Stephen Poloz will speak at 13:30 GMT in London.
• FT. UK has come to terms with austerity, study suggests: After five years of deep spending cuts, the British public has largely come to terms with austerity, and most oppose raising taxes to spend more on services and welfare, according to the most authoritative annual survey of the nation’s political and social attitudes.
• FT. Don’t panic on inflation, says Monetary Policy Committee’s Miles: Britain should not panic and cut interest rates because inflation has dropped to zero and is heading into negative territory, one of the most dovish Bank of England policy makers has told the Financial Times.
• Daily Mail. Mortgage lending comeback indicates property market pick-up: The number of mortgage approvals for homebuyers rose for a successive month in February to hit a five month high, figures showed today, in a further indication that activity in the UK housing market is slowly picking up.