Morning Report: 28 January 2015

28th January 2015 By: Admin

GBP Sterling strengthened during yesterday’s trading session versus the dollar following some benign data from the US and solid data from the UK. Gross Domestic Product for the 4th quarter of 2014 came in at 0.5% quarter-on-quarter, which was marginally worse than the expected 0.6%, however, growth in the UK is still robust coming in at 2.7% year-on-year. Sterling was also supported by comments made by MPC member Kristin Forbes, who said rates could rise sooner in the UK should inflation pick up faster than expected. Currently the UK base rate is at an all time low of 0.5% and inflation doesn’t look like rising any time soon.

EUR There are no major data releases in the Eurozone today as traders will look to technical analysis as well as data releases from other regions to gauge its direction today. There was some respite for the euro against the dollar during yesterday’s trading session following its recent plight as poor durable goods orders from the US gave rise to some profit taking in the EURUSD rate. GBPEUR remained relatively unchanged as GBPUSD was also up on the day. Speculation the victorious Syriza party in Greek elections will pursue its anti-austerity agenda without forcing an exit from the single currency bloc also helped to prop up the euro, although what stance and policies the new government in Greece actually try and implement will be a different proposition.

USD Amid turbulent weather in New York yesterday and the battering of the east coast by the storm Juno, the Dollar and US stocks also took a battering as a result of risk sentiment being affected by moves in European bond markets, and US companies issuing profit warnings as a result of the soaring Dollar hitting exporters. The Dow Jones industrial average slumped by as much as 390 points at one stage, before clawing back ground to close 1.7 per cent on the day. As New York opened the Dollar came under pressure following the release of worse than expected durable goods data before a modest rally later in the day with the more positive releases of consumer confidence, services PMI, new home sales and house price data. In terms of the day ahead, the main highlight from a fairly quiet US economic calendar is the result of the FOMC meeting. With no policy changes expected and no press conference to follow the meeting, the focus will be on the meeting statement. Expectations are for no major changes to the text. Overall, it is likely to show the Fed remains positive on the macro outlook and this may help to support the dollar later in the day.

CAD The Canadian dollar was relatively unchanged versus the US dollar yesterday as there was little data released. Darren Sissons, Managing Director at Portfolio Management Corp made some interesting comments yesterday: “Since July 2012 the Canadian currency has fallen about 25% in round numbers. This decline has turbocharged US dollar equity returns for Canadians. If those investments have grown their dividends and are expected to continue growing their dividends, the impact will be even greater.” Mr. Sissons said the potential return in Canadian-dollar terms is even greater when dividends are factored in. “Even if the US dollar declines from current heights relative to the Canadian dollar, the currency decline will be gradually offset by the dividend increases,” he said.If the Canadian dollar continues to decline, US investments will raise average portfolio returns, thus leaving more cash to buy discounted securities.

UK news

  • FT. Britain still one of fastest growing economies: Despite yesterday’s weaker than expected data, Britain is still likely to be one of the fastest growing industrialised economies in 2014. But the picture is less impressive if you look at the overall recovery.
  • FT. Osborne claims high ground as GDP rises: Britain’s economy grew 2.6 per cent in 2014, its fastest rate since the financial crisis, stoking Conservative confidence as two former stance on the economy.
  • Reuters. British growth slows, but 2014 still fastest in seven years: Britain’s economic growth slowed more than expected in the final three months of last year, but with annual growth still at its fastest since 2007 the data gave ammunition to both sides of the political divide heading into May’s election.
  • Daily Mail. Consumer confidence stuck at last year’s levels as economic recovery fails to reach people amid a slowing housing market: Families are still not feeling the effects of Britain’s economic recovery as the housing market is cooling down and household finances remain too stretched to feel the benefit of a drop in energy prices, a new report suggests today.