Morning Report: 26 October 2015

26th October 2015 By: Ranko Berich

GBP Sterling is hanging on to its gains from last week against the euro, but continues to weaken against USD this morning. It’s a slow start for the United Kingdom’s data calendar this morning, with only two minor data points in the form of the British Bankers’ Association’s Mortgage Approvals at 09:30 GMT and the Confederation of British Industry’s Industrial Order expectations at 11:00 GMT. Tomorrow’s data will be considerably more important: the first release of Gross Domestic Product Growth in the third quarter will be released at 10:00 GMT. The UK economy is expected by many observers, including the Bank of England, to have slowed somewhat, but the exact extent is a matter of intense interest. If tomorrow’s data are well short of expectations and the outlook for the future deteriorates significantly, a complete overhaul of monetary policy could ensue.

EUR We learned last week that the European Central Bank was seriously considering further monetary easing, and the euro has sold off dramatically as a result, with EURUSD plummeting over Thursday and Friday’s sessions last week. Some consolidation could be seen this week, depending on events in the United States. Plenty of relevant euro data will be released, beginning this morning at 09:00 GMT with German IFO Business Climate. Later in the week, M3 Money Supply data will be released on Tuesday. And we will get a good snapshot of inflation in the eurozone with the release of German and Spanish Consumer Price Index data on Thursday, followed by eurozone CPI on Friday.

USD The dollar is under pressure this morning despite its impressive gains vs the euro and sterling in the second half of last week. This week’s Federal Open Market Committee meeting and its announcements on Wednesday evening at 18:00 GMT will set the tone for USD over the coming weeks, and much of USD trading until then is likely to be somewhat of an afterthought. Nonetheless, today will see New Home Sales released at 14:00 GMT, and tomorrow’s Core Durable Goods orders are likely to create some USD movement. After Wednesday’s FOMC, the first reading of GDP growth in the third quarter will be released on Thursday.

CAD CAD got battered on Friday after data showed that Canada’s economy had sunk into monthly deflation in September. Although core inflation, which excludes volatile items such as petrol, remained on an upwards path, the fall in headline inflation further took the wind out of CAD which now opens this week near its weakest point since the beginning of the month. This week’s events in the US are likely to have a massive impact on CAD, but monthly Gross Domestic Product data on Friday at 12:30 GMT is likely to affect the loonie in its own right.

UK News

  • Daily Mail. Average UK house price seen jumping by nearly £60,000 over next five years to top £320,000 by 2020, says economic forecaster: The average UK house price will leap by nearly £60,000 over the next five years according to an economic forecaster, hitting more than £320,000 in 2020.
  • Daily Mail. Bank of England Governor Mark Carney says British households should prepare for interest rates to rise even though hike is not guaranteed: British households should prepare for interest rates to rise even though a hike is not guaranteed, according to the Governor of the Bank of England.
  • Reuters. Final salary pensions weigh on UK company performance – survey: The costs of managing deficit-ridden defined benefit, or final salary, pension schemes are hitting British company profits, a biennial pensions survey showed on Monday.