Morning Report: 27 January 2015

27th January 2015 By: Admin

GBP A big day for the pound today, with Gross Domestic Product figures for Q4 last year set to be released at 9.30am GMT. Markets expect the rate of growth to have slightly fallen for the third consecutive quarter, with the forecast being for a 0.6% rise. Growth in the UK has been stuck between 0.6% to 0.8% since Q2 2013, so any reading either side of this boundary will likely cause a sharp move on sterling.

EUR All eyes were still on Greece yesterday, as the winner of the general election, the Syriza party, rushed to find a coalition partner in order to gain an overall parliamentary majority. Syriza only fell two seats short of an outright majority themselves, and eventually formed an unlikely coalition with the right-wing Independent Greeks. The two organisations differ widely on social policy, but found common ground in their anti-austerity economic stance. In light of the announcement, a raft of international creditors and other commentators, including the UK’s Chancellor George Osborne, were quick to remind Greece of its obligations, and the potential consequences of failing to meet those commitments. Syriza have promised to re-hire large swathes of public sector workers, as well as fund a variety of social initiatives such as re-connecting people who have had their electricity cut off, which are promises that it simply cannot afford to keep given that its national debt is now 174% of GDP. Syriza plan to simply write off large chunks of its debt, but when three-quarters of its other creditors are fellow Eurozone nations, the outlook really is looking bleak for the Eurozone over the coming year. European Finance Ministers coincidentally are meeting today, and any fresh political developments are likely to drive price action on the euro.

USD No data out from the US yesterday kept the greenback quiet, but this afternoon we have monthly Core Durable Goods Orders, Consumer Confidence and New Home sales, as well as other less significant manufacturing and service sector gauges, which should ensure that interest in the dollar picks up later in today’s session.

CAD The Canadian dollar fell in value once more against the US dollar yesterday, having now lost almost 4% since the Bank of Canada unexpectedly cut interest rates last week, and almost 18% since its 2014 low on USDCAD. A domestic economy which continues to struggle, and a rout in the commodity markets, has seen the attractiveness of the loonie almost completely disappear over recent years, something hard to believe given that it was the markets golden child during the financial crisis. With no major data out until Friday’s GDP release, which is expected to show a month-on-month economic contraction, it is likely to be another long week for CAD.

UK news

  • FT. London faces surfeit of expensive new homes: Central London is facing a surfeit of expensive new homes, with more than a decade’s supply being built as developers compete to attract buy-to-let investors’ cash.
  • Daily Mail. Official figures set to show UK economy grew 2.6% in 2014 – well below OBR forecast of 3%: The UK economy grew by 2.6 per cent last year, the latest gross domestic product figures are expected to show today.
  • Daily Mail. Cameron confirms commitment to £12.5k of income free of tax and 40p rate starting at £50k – but where’s it going to come from?: David Cameron has promised the Conservative Party is fully committed to cutting taxes after the next election as British people ‘deserve a reward’ following years of austerity.
  • Reuters. BoE’s Forbes hints rates may rise sooner than expected: British interest rates may rise sooner than many people expect if inflation rebounds strongly after its recent sharp fall, Bank of England rate-setter Kristin Forbes said in remarks published on Monday.