Morning Report: 8 December 2015

8th December 2015 By: Ranko Berich

GBP Commodities were the biggest movers yesterday, as falling oil prices triggered volatility in several macro markets, including currencies. Sterling continued to weaken against USD, while staying largely flat against the euro. The only major sterling event was a speech from Mark Carney, Governor of the Bank of England. Carney, speaking to European parliament in his capacity of the European Systematic Risk Board, said that commercial property markets represented a source of risk that merited further monitoring. This is a risk that was already identified by the Bank of England in its last report on Financial Stability. Despite the fact that housing markets generally cause a disproportionate amount of damage during recessions, the fact that rising house prices win votes means that these risks tend to be systematically ignored. Today at 09:30 GMT, Industrial Production data for October will be released.

EUR The euro came under some pressure yesterday, as the boost from last week’s disappointing European Central Bank press conference began to fade. German Industrial Production rose only 0.2% in October, compared to 2.3% cumulative declines over the two previous months. Sentix Investor Confidence rose slightly for this month, bucking a the global trend of declining confidence. The report accompanying the survey results noted that this may be due to eurozone investors expecting additional support from more ECB stimulus, so it will be interesting to see if confidence begins to deteriorate after last week’s press conference. This morning at 10:00 GMT, revised Gross Domestic Product Growth figures for the eurozone will be released.

USD Yesterday’s chaos in commodity markets appeared to be dollar positive, mainly due to the fresh seven year lows on crude oil, which remains the United States’ key import. The data calendar was rather slow yesterday, with the Labour Market Conditions Index falling to 0.5, with last month’s reading revised upwards to 2.2. The Index tracks a combination of labour market indicators, so the upwards revision was largely due to the large upwards revision in last week’s payrolls figures. Today at 11:00 GMT, the NFIB Small Business Index will be released, followed at 15:00 by the Job Openings and Labour Turnover Summary. After Friday’sstrong payrolls figures seemed to do little to boost USD, it seems that even a very strong JOLTS figure is unlikely to generate much USD upside.

CAD The loonie reacted predictably to yesterday’s crude oil rout: with overwhelming weakness. As Brent Crude Oil reached a seven year low at $40.60, commodity currencies including CAD were solidly routed. Crude’s weakness was driven by the apparent failure of OPEC on Friday to reach any kind of an agreement on limiting crude oil supply. In a wider sense, Friday’s meeting could have been the true beginning of the end for the organization. After all, if you can’t control the supply of your own commodity, what’s the point of being a cartel at all? Today at 13:15 GMT, Housing Starts data will be released, followed 15 minutes later by Building Permits. Bank of Canada Governor Stephen Poloz will speak at 18:50.

UK News

  • FT. Weak UK high street sales data spark Christmas gloom: Retail sales failed to sparkle in November, creating fears that the best household finances in years will not translate into a bumper Christmas on the high street.
  • Reuters. UK house prices fall in November from October: British house prices fell in November from October and their increase in year-on-year terms slowed, mortgage lender Halifax said on Tuesday.
  • Daily Mail. Small businesses are costing the economy £1bn by relying on outdated financial tools and failing to invest appropriately: Relying on out-of-date information is preventing small businesses from adding £1bn to the economy.