Morning Report: 31 March 2016

31st March 2016 By: Ranko Berich

GBP Sterling is selling off this morning, after a solid performance yesterday took it to within a hair’s breadth of highs for the month against USD. GBPEUR, on the other hand, began to fall again yesterday, and is continuing its declines this morning. Political back and forth continues over Tata steel’s announcement to seek to sell or discontinue its British operations, with most corners of the political spectrum finding something in the development to bolster their arguments, from pro-Brexit campaigners to Labour. The GfK Consumer Confidence index rose to a neutral 0 reading in March, reflecting a slight improvement in the overall optimism of the surveyed consumers. This morning at 09:30 BST, the final revision of Gross Domestic Product growth in Q4 2015 will be released, alongside the latest Business Investment data and the Index of Services, as well as M4 money supply data from the Bank of England.

EUR The euro continued its ascent against the US dollar yesterday, while also undoing most of sterling’s rally from the beginning of the week. Some firm German Consumer Price Index data has helped the single currency along, after prices were reported to have risen 0.8%. The impressive bounce was largely due to the recent stabilization in crude oil prices. This morning’s releases have included German Unemployment, which showed no net change in joblessness, and the French Consumer Price Index which also showed a rapid improvement from last month. Today at 10:00 GMT, overall Eurozone CPI will be released.

USD USD generally performed well during the overnight session, making significant gains versus GBP, AUD and NZD while losing out slightly to the euro and yen. Yesterday’s major data release was strongly dollar positive: ADP’s estimate of Non-Farm Payrolls growth for this month was 200,000 jobs, more than expected by most analysts. Attention will now begin to turn to Friday’s official figures, which offer a chance for USD strength if they are similarly impressive. Today at 13:30 BST weekly Unemployment Claims data will be released, followed at 14:45 by the Chicago Purchasing Managers’ Index, a confidence survey released by research company ISM. The Federal Reserve’s Bill Dudley will speak at 22:00, potentially giving him the opportunity to voice his own opinion on the path of monetary policy after several of his colleagues have given differing assessments over the last two weeks.

CAD The loonie continued its relentless advance against USD yesterday, despite crude oil prices falling. The Bank of Canada’s Deputy Governor Lynn Paterson gave a speech on the topic of lower commodity prices and their effect on the economy, saying that although the economy was recovering, the readjustment after the natural resource investment boom of the last decade would take at least two years. Today at 13:30 GMT, monthly Gross Domestic Product data will be released.

UK News

  • BBC. UK economy grows faster than expected. The UK economy grew 0.6% in the fourth quarter of 2015, higher than the previous estimate of 0.5%. As a result, the economy grew by 2.3% for the whole of 2015, rather than 2.2% as previously thought, according to the Office for National Statistics (ONS).
  • Financial Times. UK current account deficit balloons beyond forecasts. The country’s current-account deficit now stands at £32.7bn for the fourth quarter, much higher than the (revised) £20.1bn seen in the previous quarter, and larger than the £21.2bn expected by economists in a Bloomberg poll. That’s the biggest deficit as a share of GDP since records began in 1955, equating to some 7 per cent of GDP, up from 4.3 per cent in the third quarter.