UK Industrial Production for October Shows 0.4% Growth

The just released domestic industrial production report has further substantiated the belief that the UK economic recovery during the final quarter of 2013 will be driven by growth in a varied spectra of areas and with the BoE disinclined towards raising interest rates in the near future, the economy is expected to gain further momentum going into the next year. Investors will watch to see if today’s NIESR GDP estimate is commensurate with the current trend. In the US, even as FOMC officials seem inclined to favour of QE3 tapering, investors have largely stayed on the sidelines awaiting the FOMC’s decision later this month. In the Euro zone, Mario Draghi’s speech is expected to stimulate volatility in markets in the session ahead.

Pound Sterling – UK Markets

In a relatively light trading session, the Pound steadily nudged higher against the majors yesterday, despite Mark Carney’s signalling that the BoE is averse to raising interest rates any time soon. The BoE Governor opined that despite a buoyant domestic housing market, record low interest rates are needed to spur growth and restore confidence in the nation’s banking sector. Meanwhile, a gauge of domestic house prices released by RICS rose to the highest level in over ten years for November. However, hawkish comments by FOMC policymakers later in the day capped Sterling’s gains against the greenback yesterday. Meanwhile, the Pound is trading in a tight range against the majors this morning after industrial production and trade data just out failed to surprise markets on the upside. However, the data has demonstrated that the UK economic recovery remains firmly on track. The NIESR GDP estimate numbers later today will drive trading sentiment in the Pound against the majors in the session ahead.

US Dollar – US Markets

Though, influential FOMC policymakers’ maintained that the central bank is closer to trimming its monthly bond buying programme, the affirmation offered little support for the greenback yesterday. James Bullard, the President of the St. Louis Fed and a voting member on the FOMC panel, opined that keeping in mind the recent improvements in the US labour market and weak inflation numbers, the central bank may taper its record stimulus on a smaller scale in its meeting later this month. Additionally, Richard Fisher, the Dallas Fed President, also supported the notion of QE3 tapering at the earliest, while stating that financial markets are in a better position than before to start scaling back QE3. Meanwhile, the US Dollar is trading on a weaker footing against the majors in today’s trading session. With little on the domestic economic calendar to attract market attraction, the greenback will track global economic news flows today for further direction.

Euro – European Markets

The ECB’s decision to maintain the status quo on its policy stance in its monetary policy meeting last week has supported the common currency against its counterparts ever since and yesterday was no different, with the Euro nudging higher against the US Dollar, despite the weak set of German and Euro zone economic data and tapering talks by influential Fed officials. Investor confidence in the Euro zone unexpectedly declined for December, adding to concerns over the currency bloc’s economic outlook. Likewise, the surprisingly disappointing German industrial production report highlighted the uneven nature of recovery in the Euro zone’s largest economy. Meanwhile, Jeroen Dijsselbloem, the head of Euro zone finance ministers, has warned that Greece will have to implement more fiscal reforms in order to receive further funding under its bailout programme. Meanwhile, the single currency is trading higher, albeit in a tight range against the greenback this morning. The ECB President, Mario Draghi’s speech today will be closely scrutinised by investors for cues on the ECB’s likely policy stance in the near future.

Other Currencies – Highlights

The Australian Dollar has nudged lower against the majors this morning following the release of disappointing domestic economic data earlier in the day. Business confidence in Australia deteriorated further in November after climbing to more than a three-year high for September, while demand for home loans also slowed down for October, indicating that the economy continues to struggle on its path to economic recovery. The weakness in the Aussie Dollar can also be attributed to the mixed economic data emanating from China, Australia’s largest trading partner, over the past two days. Meanwhile, investors will keep a tab on the overnight domestic consumer confidence print for further direction to risk appetite. Moving ahead, domestic labour market data and a slew of important global economic releases will prove crucial for the Aussie Dollar against the majors in the week ahead.