BoE’s Mark Carney Warns of Global Threats to UK’s Financial Stability
The global economic calendar is chock-a-block with economic data today. The UK’s GfK consumer confidence index dropped further in November. Moreover, the Bank of England (BoE), in its latest financial stability report, warned that the outlook for Britain’s financial stability remains challenging.
In the Eurozone, data showed that German retail sales rebounded to a 5-year high in October. Going ahead, market participants await the Eurozone’s preliminary consumer price index (CPI) data for November along with a speech by the European Central Bank (ECB) President, Mario Draghi. In the US, investors are looking to a handful of economic indicators including inflation news and the Federal Reserve’s Beige Book survey, a thermometer of the economy’s health. Additionally, trading today will be impacted by a key meeting of the Organisation of Petroleum Exporting Countries in Vienna later today.
Pound Sterling – UK Markets
The Pound is trading mixed against the US Dollar and the shared currency this morning. Earlier in the session, the BoE in its bi-annual financial stability report warned that the likelihood of further risks to UK’s financial system remains elevated, following Britain’s vote to leave the European Union. The central bank's Financial Policy Committee also flagged risk arising from the recently concluded US presidential elections, signalling that it reinforced existing vulnerabilities in the British economy. On the data front, British consumers’ mood soured further in November, as indicated by the long-running GfK consumer confidence index. All five categories of the index took a tumble, as market participants grew increasingly anxious about UK’s general economic prospects and about their personal financial situation.
Yesterday, Sterling ended higher against its major counterparts, after the release of twin robust economic reports. Data showed that lending to UK individuals in October surpassed expectations and grew at its fastest pace since 2005. Meanwhile, the number of mortgages approved last month was the highest since March this year.
US Dollar – US Markets
The US Dollar is trading on a stronger footing against a basket of major currencies this morning, ahead of a string of key data points in the US. These are: ADP employment change, personal income & spending and core personal consumption expenditure, pending home sales data, along with the Fed’s Beige book report, which will provide an overview of economic activity in the 12 Fed districts. Further, personal income & spending are expected to advance in October, while ADP employment is likely to report modest job gains.
Yesterday, data released showed that the second estimate on US gross domestic product advanced more than expected at an annualised rate in the third quarter of 2016, its fastest pace in two years. The economic growth was revised higher on the back of robust consumer spending. Moreover, the nation’s consumer confidence rose to reach its highest level in more than 9 years in November. Additionally, the Fed Governor, Jerome Powell, indicated that the possibility for an interest rate rise has strengthened, as the US employment and inflation have moved closer to the central bank’s target.
Euro – European Markets
The shared currency is trading lower against its major peers this morning. Data released earlier in the session showed that German retail sales rebounded to post their strongest monthly gain in over five years in October. Meanwhile, the nation’s seasonally adjusted unemployment rate remained steady at 6.0% in November. Meanwhile, French flash consumer prices advanced above expectations on an annual basis in November. Moving ahead, investors look forward to a speech by the ECB President, Mario Draghi along with the Eurozone’s preliminary CPI data for November.
Yesterday, data showed that the Eurozone’s business climate indicator surprisingly fell to a 3-month low in November. On the other hand, the European Commission’s headline economic sentiment index improved to an 11-month high in November, as upbeat assessments of consumers and retailers helped offset the weakness in industrial sentiment. Separately, Germany's annual inflation rate failed to accelerate further in November, in a sign that price pressures are still weak in the Eurozone’s biggest economy.
Other Currencies – Highlights
The Kiwi Dollar has extended its upward trajectory for the fourth consecutive session against the greenback this morning. The domestic currency continued to maintain its strong bid tone after the Reserve Bank of New Zealand (RBNZ) Governor, Graeme Wheeler stated that the central bank expects consumer inflation to move back within its target range in December. On the data front, business confidence in New Zealand took a big hit in November, compared to its October read. The outlook also was not that encouraging as the index slightly dipped for this month. Separately, figures from RBNZ showed that New Zealand's broad money supply, or M3 growth quickened in October, after easing in the previous two months.
Yesterday, the RBNZ in its latest Financial Stability Report (FSR), signalled steady interest rate for the foreseeable future to curb a soaring property market. The central bank issued several stark warnings about the build-up of risks in the housing market and dairy market indebtedness.