Morning Report: 9 November 2015
9th November 2015 By: Ranko Berich
GBP GBPUSD plunged on Friday, driven downwards against USD by some very strong payrolls data in the US. Sterling fared slightly better against the euro, and managed to close the week roughly where it started. Friday’s fundamental data was actually quite good: Manufacturing Production shot up 0.8% in September, marking two months of solid gains. The UK’s September Trade Balance data showed a deficit of 9.4 billion on goods, which narrows to a deficit of 1.4 billion once services are included. This week will start slowly for sterling, with no data releases today and only the British Retail Consortium’s Retail Sales Monitor tomorrow. Wednesday will be the key day: labour market data including the all-important Average Earnings Index will be released at 09:30 GMT.
EUR As one observer commented, Mario Draghi may as well have covered himself in glitter after the events of the last two weeks: the euro’s months long rally from lows in March appears to have been well and truly broken. Since the ECB’s last meeting and press conference raised the prospect of more quantitative easing, the euro has been weakening and Friday’s US data releases saw further, significant falls in EURUSD. German Industrial Production fell 1.1% in September, reinforcing the bearish mood. This morning at 09:30 GMT the Sentix Investor Confidence Index will be released, while the Eurogroup of European finance ministers meets. Later in the week, German and French inflation data will be released on Thursday morning, followed on Friday by preliminary Gross Domestic Product growth data for several eurozone countries including France and Germany, as well as the eurozone as a whole.
USD Friday’s non-farm Payrolls data was nothing short of spectacular, and the US dollar has strengthened across the board since then. 271,000 jobs were created in October, according to the official Bureau of Labour Statistics data, far more than the 137,000 previously and well above most forecasts. Average earnings also grew a healthy 0.4% month on month, bringing year on year wage growth to its highest level since 2009. The Unemployment Rate also fell to just 5.0%, rounding out a report that was so strong it all but confirmed that the Federal Reserve would be looking to raise interest rates at its December meeting. This afternoon at 15:00 BST the Labour Market Conditions Index will be released. Later in the week, Fed Chair Janet Yellen will give a closely watched speech on Thursday at 14:30 GMT, just before the release of the monthly Job Openings and Labour Turnover Summary at 14:00. Three other prominent members of the rate setting Federal Open Market Committee will also speak on Thursday, with Evans, Dudley, and Fischer all speaking in the afternoon. Retail Sales data will be released on Friday at 13:30.
CAD The loonie weakened more than two full percentage points from Tuesday’s low on USDCAD to Friday’s high. Although the spotlight on Friday was firmly focussed on the US non-farm Payrolls report, Canada’s own labour market data was released on Friday, showing a surprise fall in the unemployment rate and strong job creation. Today at 13:15 GMT Housing Starts will be released.
- FT. Low interest rates hand Osborne option to scale back cuts: Continuing low interest rates have handed George Osborne a windfall ahead of this month’s spending review, leading to expectations that the UK chancellor will use some of the cash to scale back £20bn of planned cuts.
- FT. CBI downgrades UK growth forecasts over global economy worries: The CBI has downgraded its forecasts for UK growth for this year and next, although it said the national economy remained resilient in the face of wider fears for global expansion.
- Reuters. UK economic growth edges up in 3 months to October – NIESR:Britain’s economy picked up a bit of speed in the three months to October, the National Institute of Economic and Social Research, a think tank, said on Friday.
- Daily Mail. Stamp duty blamed for house sales slump that is set to bring in less for the Treasury: The Chancellor is facing mounting criticism over his changes to stamp duty on house purchases amid fresh reports that house sales are slumping.
- Guardian. UK pay rises to stay low despite economic recovery: Wages will increase by an average of 2% over the next year as employers continue to recruit workers, according to CIPD survey.