Morning Report: 26 November 2015

26th November 2015 By: Ranko Berich

GBP Sterling enjoyed a brief rally yesterday following on from Chancellor George Osbourne’s Autumn Statement, but is selling off this morning vs USD this morning. The Autumn Statement contained a few concessions made for political reasons, such as the scrapping of highly controversial plans to axe tax credits. Across non-protected departments such as as business, the Home Office and Justice, the average budget cut was 19%. The Office for Budget Responsibility added some 27bn to its five year finances forecast, helped along by expectations of higher tax revenues, and expected lower interest. Despite the mostly cosmetic changes, the overall trajectory of the government’s plans, of course, remains unchanged. Fiscal policy will remain tight for the remainder of this parliament.

EUR Another day, another violent bout of euro weakness seems to be this week’s theme, and yesterday was no exception. The single currency fell to fresh lows late in the afternoon, after in the morning the European Central Bank was reported to be considering two tier charges for banks hoarding cash. The measure itself was less important than the source, which was Reuters, which has broken several market moving inside stories from the ECB and also reported that the Bank was considering further bond purchases. Reading between the lines, it appears the ECB is deliberately and clearly signalling its intention to increase monetary accommodation to the eurozone. To dust off an old turn of phrase, in these circumstances a long position on the euro may as well be a seat on the Titanic. This morning has already seen the release of M3 Money Supply in the eurozone, which rose an encouraging 5.3% year on year, while Private Loans rose 1.2%.

USD Yesterday’s events saw the US dollar index DXY briefly break above the key 100.00 level it has been flirting with for weeks, indicating the strength of bullish sentiment on the dollar. Yesterday’s data supported the fundamental case for dollar strength, which is that the economy remains on a solid enough trajectory for the Federal Reserve to raise interest rates in the immediate future. Core Durable Goods orders rose 0.5% month on month, while the Core Personal Consumption Expenditure Price Index rose 1.2%, unchanged from last month. Weekly Unemployment Claims were low at just 260,000. Today is Thanksgiving Day in the United States, and no data will be released.

CAD CAD did see some intraday volatility yesterday, but ultimately closed almost exactly where it opened against USD. Crude Oil Inventories in the United States continued to build, marking 9 straight weeks of supply glut. Crude oil managed to hang on to most of its recent gains, however. Today at 13:30 BST, Corporate Profits data will be released.

UK News

  • Reuters. Osborne uses tax forecast to soften spending cuts: Chancellor George Osborne took advantage of stronger forecasts for tax revenues to drop an unpopular plan to scrap some benefits for low-earners and ease other deep cuts, but he stuck to a target for budget surplus in 2020.
  • Daily Mail. The death knell for buy-to-let? Stamp duty bill on a £275k home is almost trebled as Chancellor targets landlords: Chancellor George Osborne landed buy-to-let landlords another shock by announcing a 3 per cent stamp duty surcharge on property purchases from 1 April 2016.
  • FT. George Osborne says Autumn Statement does not mark end of austerity: George Osborne has denied that his Autumn Statement marked the end of austerity, insisting there were still difficult decisions to take with billions of pounds to be cut from public spending and welfare.