Morning Report: 30 October 2015

30th October 2015 By: Ranko Berich

GBP Sterling bounced against the US dollar yesterday, suggesting the two week downwards trend on GBPUSD may be challenged today. Progress against the euro, which also rallied vs USD, was lacklustre. Bank of England Money and Credit data for September showed a dip in mortgage approvals, to 69,000 over the month. Net Lending to individuals, however, continued to rise. None of the data were so far outside expectations as to elicit a sharp response from sterling, including headline money supply, which shrank 1% over the month. Nationwide’s House Price Index rose 0.6% in October, as chatter in the media increased over the risk of a housing market bubble in the UK. The Confederation of British Industry released its latest monthly survey of retail stores, showing that both sales and orders grew at a slower pace in October, following a strong September.

EUR The euro found its feet somewhat yesterday, rallying against USD after being battered in the wake of Wednesday’s central bank announcement in the United States. Yesterday’s Spanish and German Inflation data, while low, were actually slightly better than expected. German nationwide Consumer Price Index inflation was 0.0% month on month in October, slightly better than most forecasts which were expecting outright deflation. Prices in Spain contracted 0.7% month on month, again a poor result but an improvement from the 0.9% drop seen previously. Today’s eurozone CPI figures at 10:00 GMT will be closely watched as a bellwether for monetary policy, which is on the edge after last week’s European Central Bank meeting raised the prospect of additional quantitative easing.

USD Consolidation seems to be the main theme of USD trading at the moment, with the greenback under pressure against most of the G10 after Wednesday’s rapid gains. Yesterday’s first estimate of Gross Domestic Product growth in the third quarter showed GDP growing at an annualised 1.5%, slightly less than expected and significantly slower than the rapid 3.9% growth seen in Q2. GDP prices rose 1.2%, also below both expectations and the Q2 rate. Yesterday’s data was not all bad, however: Weekly Initial Jobless Claims were once again low at just 260,000, indicating that despite the economy’s growth slowing, the labour market remains tight. More headline data will be released today, with the Employment Cost Index, Personal Spending and Income all due for release at 12:30 GMT. The important Personal Consumption Expenditures Price Index will also be out at this time. As the Federal Reserve’s preferred inflation measure, PCE prices are the most relevant indication of how solid price pressure is in the US economy. Later in the afternoon, the Chicago Purchasing Managers Index will be released at 13:45 BST.

CAD Yesterday was a relatively quiet day for CAD, which drifted lower against USD but remained inside the range of rates already seen in recent trading sessions. Yesterday’s Price Indices data from Raw Materials and Industrial Products actually showed a 3% month on month improvement in Raw Materials, mostly driven by a modest rally in oil and other key commodities. Today at 12:30 GMT, monthly Gross Domestic Product Data for Canada will be released.

UK news

Reuters. Britain may face two-notch rating cut if it leaves EU – S&P: Britain’s credit rating could be cut by as much as two notches if it leaves the European Union, Standard & Poor’s told Reuters on Thursday.

Reuters. UK consumer confidence slips to four-month low: British consumer morale slipped to its lowest in four months in October, a survey showed on Friday, adding to signs that domestically driven growth is continuing to ease in the final three months of the year.

Reuters. British mortgage, retail sales data cast shade of doubt over economy: British mortgage approvals fell for the first time in four months and retail sales growth softened, casting a shade of uncertainty over hopes that the economy will regain momentum in the final months of the year.