Morning Report: 9 December 2015

9th December 2015 By: Ranko Berich

GBP Falling crude oil prices and continued euro strength remained the main themes on currency markets yesterday, and sterling saw another day of significant losses against the euro. Weak Manufacturing Production data from the UK did not help sterling’s cause. Manufacturing output fell 0.4% in October, far worse than the modest declines expected. Considering the severity of the UK’s current account deficit has been steadily accounting for a greater and greater share of Gross Domestic Product, George Osbourne’s “export led recovery” would have been a fine thing indeed, but yesterday’s data confirmed that the whole concept remains a non-starter. Halifax’s House Price Index fell 0.2% in November, after growing 1.1% previously, while the NIESR estimated GDP growth to be 0.6% over the three months to November. No Sterling data of note will be released today, apart from the minutes from the latest meeting of the Bank of England’s Financial Policy Committee at 10:30 GMT.

EUR Since midnight yesterday the euro has strengthened against almost the entire G10, extending gains from last week as markets continue to wake up to the fact that the ECB will not be delivering extra easing in time for Christmas. Fundamental data, as is often the case these days with the euro, was beside the point, but eurozone Gross Domestic Product was confirmed to have grown 0.3% in the third quarter. Today will be another slow day in terms of fundamental data, although Germany’s Trade Balance was shown to once again be in very healthy surplus in October.

USD The dollar is suffering this week, with only the commodity currencies and GBP failing to strengthen versus the greenback out of the G10. Job Openings fell slightly in October, while remaining well above recent historical levels, probably due to the very strong job creation seen over the month. Economic optimism, as measured by TIPP, improved this month compared to last, but the survey results remained indicative of overall pessimism. Wholesale Inventories data will be released at 15:00 GMT, but considering the attention being paid to crude oil prices at the moment, the release of crude oil inventories at 15:30 is more likely to cause movement in markets.

CAD Unsurprisingly, the loonie got absolutely slaughtered yesterday, with fresh lows on crude oil driving USDCAD to its highest level since 2004. Bank of Canada Governor Stephen Poloz helped the currency’s depreciation along by giving a speech where he said that negative interest rates remained an option in Canada, although he did not believe they were necessary at the moment. Today’s 15:30 GMT release of US crude oil inventories is likely to be important for CAD, as talk of even further falls in crude prices hits the wires.

UK News

  • Reuters. British Chambers of Commerce downgrades UK growth forecasts: The British Chambers of Commerce on Wednesdaydowngraded its British growth forecasts for the next three years on the back of weaker trade and manufacturing, which have been dragged by a slowdown in the global economy.