How Gloomy will Mervyn be Today?

The labour market report offered no clear picture, as seekers of jobless benefits in the UK unexpectedly rose while the unemployment rate nudged lower. Traders now focus on BoE Governor Mervyn King’s press conference today for a glimpse into BoE monetary plans and the central bank’s key forecasts for the economy. In the US, FOMC minutes of the latest monetary policy meeting will be watched for clues on future course of action in the US. Meanwhile, Greece managed to successfully complete its short term debt auction yesterday, thereby preventing a near term default.

Pound Sterling – UK Markets

The latest employment report from the UK offered a mixed picture. Data revealed an unexpected jump in claimant count for October, while the unemployment rate slipped to 7.8% for September. Against this backdrop, tomorrow’s retail sales figures will be closely watched for further cues regarding the British economy. In the midst of mixed domestic data, traders are expected to remain glued to BoE Inflation Reports for cues on how the QE programme could unravel. Apart from economic forecasts, traders are also expected to keep a close track of BoE Governor Mervyn King’s press conference for insights into the future course of monetary policy in Britain. Sterling weakened against the Euro in yesterday’s session after Greece managed to raise funds in order to prevent a debt default. However, a greater than expected jump in UK inflation figures offered support to Sterling against the greenback. Apart from crucial domestic cues from the UK, traders are also expected to pay attention to important economic data releases in the US during today’s session.

US Dollar – US Markets

The greenback is trading flat against the Euro and Pound, as concerns surrounding the “fiscal cliff” in the US were offset by receding worries over Greece. Greece has managed to avert a default following yesterday’s successful debt auction. Retail sales data slated for release today is expected to provide insights into the impact of Hurricane Sandy on the US economy. Meanwhile, minutes of the Fed’s latest monetary policy meeting will be closely followed for indications on the “operation twist” plan, which is set to expire at the end of the year. Today’s factory price inflation figure and tomorrow’s CPI reading are expected to provide a clearer picture over price trends in the economy, following the Fed’s decision to inject additional stimulus. With worries about the “fiscal cliff” coming to the fore, US Treasury Secretary, Timothy Geithner, has cautioned that a delay in sealing a deal would create more uncertainty in the markets. Meanwhile, the US budget deficit soared as spending outpaced revenues.

Euro – European Markets

The Euro staged a recovery against its peers and breached the 1.27 mark against the US Dollar in yesterday’s session, as Greece successfully auctioned its short term debt, thereby averting the possibility of a near-term default. Additionally, the German Finance Minister, Wolfgang Schaeuble, indicated that Germany was open to the idea of making its contribution for Greece’s aid through a single payment. Meanwhile, a persistent logjam between Troika officials has turned attention towards the region’s policymakers’ meeting scheduled next week. The deepening debt crisis in the Eurozone appears to be taking its toll on core Eurozone nations, as data revealed an unexpected fall in German economic confidence for November. Tomorrow’s GDP figures from Germany and France are expected to provide more clarity on this front. Among major releases today, the currency markets will be closely watching the Eurozone’s industrial production figures for September. Elsewhere, a flurry of economic releases from the other side of the Atlantic is expected to provide direction to risk appetite.

Other Currencies – Highlights

The Kiwi Dollar underperformed most of the high yield currencies in today’s session, after data revealed that the nation’s retail sales unexpectedly declined 0.4% for the third quarter - following a 1.3% increase in the previous quarter - broadly due to a drop in supermarket and grocery store sales and in sales of motor fuel. The weak retail sales data and elevated levels of unemployment in the island nation offers room for the Reserve Bank of New Zealand to lower its benchmark interest rate in next month’s monetary policy meeting. Meanwhile, data revealed that non residential bond holdings in New Zealand remained unchanged at 62.4% for October. Today’s manufacturing data and tomorrow’s consumer confidence readings are expected to provide further direction to the Kiwi Dollar. Additionally, key economic releases from the US and developments from the Eurozone are also expected to influence the kiwi in today’s session.