BoE Provides Respite

In the much anticipated meeting yesterday the BoE left its monetary policy unaltered, providing support to Sterling against the majors. However, with the latest £50 billion round of stimulus being exhausted, investors will focus on the Inflation Report and the BoE Governor’s accompanying press conference next week for more clarity. Today’s upbeat economic data and abating inflationary pressures in China have eased worries surrounding global growth. Meanwhile, reports indicate that the Eurozone finance ministers may not decide on unlocking funds for Greece until late November. In today’s session, markets are expected to keep an eye on US consumer confidence for further cues.

Pound Sterling – UK Markets

In an expected move, the BoE left its asset purchase target unchanged in its monetary policy meeting yesterday, thereby providing a fillip to Sterling against both the Euro and the US Dollar in yesterday’s trading session. In the midst of uncertainty over the future course of monetary policy that the BoE might pursue, next week’s inflation report is expected to shed some light on this front. Following the sharp jump in UK trade deficit for August, export oriented sectors are showing signs of improvement as data just out has revealed that trade deficit in the UK narrowed for October, validating the sharp rise in GDP growth for the third quarter. Sterling has maintained its gains against the Euro following the UK trade balance data. Inflation figures, retail sales and unemployment data next week are expected to provide more hints on the health of the British economy in the initial phase of the fourth quarter.

US Dollar – US Markets

The greenback climbed against the Euro in yesterday’s trading session, due to concerns over the timing of the release of the next bailout tranche for Greece. However, the US Dollar is trading flat against the majors this morning. Data earlier today revealed that Chinese industrial output and retail sales grew at a stronger than expected pace for October, while easing consumer price inflation pressure has offered some room to the Chinese central bank to undertake easing measures. Meanwhile, concerns surrounding the US fiscal cliff fail to abate, with the US Congressional Budget Office reiterating that the US could slip into a recession, if issues surrounding the fiscal cliff are not addressed. Additionally, the IMF also appear to be concerned, while S&P sees a 15% chance of policymakers not reaching a sufficient political compromise in time to avert the crisis. Meanwhile, jobless claims in the US unexpectedly declined whilst trade deficit narrowed, offering further evidence of the economy gathering strength. The consumer confidence index due later today is keenly eyed and is expected to offer direction to the greenback against the majors.

Euro – European Markets

Although the Greek Parliament has approved the first round of austerity measures, it remains to be seen if Parliament approves the 2013 budget proposals in a vote scheduled for the weekend. The Euro retreated against its major peers in yesterday’s session, amid reports that Eurozone finance ministers may not approve the next aid tranche to Greece until the end of this month. Policymakers are expected to wait for a full report on the country’s compliance with the terms of its bailout. The uncertainty over the EU finance ministers stance could spiral Greece into a deeper crisis, as Greek officials have indicated that the nation may run out of funds as early as next week. Additionally, the ECB President reiterated his concerns regarding the region’s economy, while keeping its key interest rate unchanged. Meanwhile, Spain successfully completed its long term bond auction for 2012 yesterday, offering some breathing space to the government before the crucial elections in Catalonia. With little on the European economic calendar today, markets are likely to focus on developments in Greece for further direction.

Other Currencies – Highlights

The Kiwi Dollar has advanced against the Euro and Sterling in today’s session after data revealed a sharp rise in house price for October, as demand remained robust in the country's major cities. Additionally, credit card spending climbed, revealing a recovery in the nation’s consumer spending. To add to the optimism, economic data from China has highlighted that the nation might return to the path of recovery in the fourth quarter. Data released earlier today indicated that Chinese industrial production and retail sales climbed more than expected for October. Additionally, easing inflationary pressures and falling input costs continue to provide sufficient room for the Chinese central bank to lower interest rates in the near future. With no domestic economic releases scheduled today, markets are expected to keep a watch on today’s US consumer confidence data and trade data from China due tomorrow, for further direction to market risk appetite.