Morning Report: 6 November 2015

6th November 2015 By: Ranko Berich

GBP Yesterday’s Bank of England events weakened sterling significantly, with GBPUSD falling 1.5% throughout the day and the early hours of this morning. Between the Monetary Policy Summary, Meeting Minutes, and press conference given by Governor Mark Carney, one thing became abundantly clear: there is little prospect for rate hikes in the near future. Due to the uncertainty surrounding the bank’s forecasts for productivity and wage growth, the majority of the Monetary Policy Committee seem happy to wait until a very clear sign emerges that unit labour costs are beginning to rise, bringing inflation up with them. The implication for monetary policy is that there is little prospect for rate hikes in the near future. Today at 09:30 BST, Industrial Production will be released alongside Trade Balance data.

EUR The euro seemed to find its legs somewhat yesterday, enjoying a modest recovery vs USD in the afternoon after reaching a fresh low in the morning, while performing well against sterling overall. German Factory Orders data in the morning showed a 1.7% fall in Orders in September, marking the third consecutive month of declines. September’s Retail Sales data also showed a decline of 0.1%. Continuing the bad news, this morning has already seen September German Industrial Production fall 1.1%, and a slightly larger than expected Trade Deficit for France. All in all, things look fairly bearish for the euro this morning, turning attention to EURUSD and this afternoon’s important releases in the US.

USD It’s jobs day today, and today’s Non-Farm payrolls report is likely to be a decisive event USD, which has benefitted this week from EUR and GBP weakness. It would almost be quicker to say which members of the Federal Open Markets Committee did not speak yesterday, with no less than five FOMC members on the wires in the afternoon. Although there was much talking done by Fischer, Tarullo, Lockhart, Dudley and Evans, little new was said. Lockhart stated that a case could be made for a return to normal monetary policy, but this was far from a ringing endorsement of rate hikes in December. The crucial release for informing that decision is likely to be today’s Non-Farms report. After two months of slowing job creation, if a return to form is seen today then tightening in December will become very likely, meaning USD is likely to respond sharply to today’s release at 13:30 GMT. Later in the evening, the Fed’s Lael Brainard will speak in Washington DC.

CAD The loonie traded flat against USD yesterday, as markets awaited today’s important data releases. The Ivey Purchasing Managers Index fell slightly in October, showing only a slight deterioration in the overall rate of growth reported by the surveyed businesses. Today’s labour market data is likely to have more impact when it is released at 13:30 GMT, especially considering it’s co incidence with the critical Non-Farm payrolls report in the US.

UK News

  • Reuters. Bank of England’s rates messages are not a failure – Shafik: The Bank of England is not wrong-footing investors and households with its various signals on when interest rates might start to rise, a deputy governor at the central bank said on Friday.
  • Reuters. UK manufacturing growth surges to 1-1/2-year high: British manufacturing output rose in September at the fastest monthly pace since April 2014 and the country’s goods trade deficit narrowed more than expected, official data showed on Friday.
  • Reuters. UK permanent staff hiring picks up, wages firm: Hiring of permanent staff via British recruitment firms increased at the fastest pace in four months in October and starting salaries also picked up, according to a survey that pointed to a further recovery in the labour market.