Morning Report: 29 March 2016

29th March 2016 By: Ranko Berich

GBP Sterling began the week yesterday with some impressive gains versus the US dollar and euro, prompted mainly by weak data in the US. No data was released in the United Kingdom, as the Easter Monday holiday was observed. Today’s only release will be a statement from the Bank of England’s Financial Policy Committee, which will detail the FPC’s assessment of financial stability risks facing the economy. Later in the week, the latest and final revision to Gross Domestic Product growth in the fourth quarter of 2015 will be release on Thursday, alongside data for Business Investment and the Index of Services.

EUR After enjoying a rally against USD yesterday the euro is on the back foot this morning, despite some reasonably solid Money Supply data which showed that M3 Money Supply was expanding at an annual rate of 5%, and that lending to the private sector continued to accelerate. The rest of this week will see the latest German, French and Eurozone inflation data released on Wednesday and Thursday. Survey data for the manufacturing sector will be released on Friday for several Eurozone economies, as well as the Eurozone as a whole.

USD USD was battered by weak fundamental data yesterday, but today a speech from Federal Reserve chair Janet Yellen will shed light on the Fed’s intentions for monetary policy in the immediate future, a potentially decisive event for the greenback. Personal Consumption Spending rose just 0.1% in February, less than expected by most analysts, while the 0.5% growth initially reported for January was revised downwards to 0.1%. The Personal Consumption Expenditures Price Index, an inflation measure favoured by the Fed, rose 1.0% year on year, still far below the Fed’s 2% target. However, once fuel and other volatile items were excluded, Core PCE inflation was healthier at 1.7% year on year. Yellen’s speech today at 16:20 BST is titled “Economic Outlook and Monetary Policy”, and given the relative sparseness of today’s calendar attention will be firmly focussed on the Fed Chair’s remarks. This is especially true after no less than three of Yellen’s colleagues at the Fed last week directly acknowledged the possibility of more rate hikes in the near future.

CAD Like most of the G10 CAD took advantage of yesterday’s USD weakness, but did not manage to recoup all of its losses from last week. Crude oil prices remain materially lower than a week ago, suggesting that this year’s rally may be beginning to age. Today at 12:30 BST, price indices for Raw Materials and Industrial Products will be released, and later in the week monthly Gross Domestic Product Growth data will be out on Thursday.

UK News

  • The Guardian. Financial sector confidence about UK economy drops sharply. Fears over the UK’s faltering economic outlook have been underlined by a survey showing a sharp drop in confidence among financial services firms, against the backdrop of the Chinese slowdown and the EU referendum.
  • The Telegraph. A ‘perfect storm’ is brewing over the most important part of the UK economy. A “perfect storm” of fears over the state of the world economy, Britain’s place in the EU, and market volatility is gathering over Britain’s dominant financial services sector, according to a new survey. Banks and investment firms have reported the sharpest deterioration in their outlook in over four years in a survey of 104 firms carried out by the Confederation of British Industry (CBI) and accountants PwC.