GfK Reports Weak Consumer Morale in UK
Today’s public sector borrowing report for November revealed that government debt in the UK continued to rise, weakening hopes that the British Chancellor might be able to reach his deficit reduction targets this fiscal year. The report provided little relief to Sterling investors after the GfK survey released earlier today indicated that morale among consumers in the UK weakened surprisingly for December.
Across the Atlantic, market participants are likely to keep a tab on speeches by Fed officials, Jeffrey Lacker and Charles Evans, later today to get more clarity on the US Fed’s policy guidance going forward, especially after it dropped the “considerable time” phrase from its post-meeting policy statement.
Pound Sterling – UK Markets
Data just out indicated that public sector net borrowing in the UK increased less than expected for November. However, with government debt continuing to pile up, prospects are strengthening that the UK Chancellor might not be able to achieve his target for reducing the nation’s public debt this fiscal year. Separately, another report released earlier today revealed that confidence among consumers in the UK deteriorated unexpectedly for December, reigniting concerns of potential weakness in domestic spending levels. Considering that Britain’s economic growth gained little support from domestic consumption levels for the past few quarters, today’s report has raised fears that this scenario is likely to stay for the fourth quarter as well. Additionally, Sterling investors will keep a tab on next week’s final GDP reading in the UK which is anticipated to show an upward revision for the third quarter.
Yesterday, the Pound strengthened against the greenback and the Euro after data revealed that UK retail sales improved more than expected for November, mainly led by robust Black Friday sales last month.
US Dollar – US Markets
The contradicting US macro reports released yesterday resulted in the greenback remaining mixed against its key counterparts. The preliminary Markit services PMI reading indicated that performance of the US non-manufacturing sector weakened unexpectedly for December and stoked concerns of a potential slowdown in the nation’s economic growth, especially after this week’s downbeat Markit flash manufacturing PMI data. The report further revealed that the deceleration in the nation’s services sector was mainly due to a slowdown in employment growth and new businesses. Meanwhile, another report indicated that the number of first time jobless claimants in the US declined unexpectedly last week, strengthening prospects that employment growth in the economy continued its robust trend for the last month of 2014.
With no crucial domestic macro updates in today’s trading session, speeches by FOMC members, Charles Evans and Jeffrey Lacker, later today are expected to attract considerable attention among investors, particularly after the US Fed resorted to a slightly hawkish tone in its post-meeting policy statement earlier this week.
Euro – European Markets
The GfK survey released earlier today revealed that morale among German consumers improved more than expected for January, registering its third consecutive monthly rise. Considering encouraging ZEW and Ifo surveys released earlier this week, today’s data has strengthened hopes that the overall macro picture in Europe’s largest economy is improving. However, market participants remained concerned over whether improving consumer morale will provide support to Germany’s weak inflation, especially amid prospects of a deflation in the Euro zone. Additionally, another report revealed that German producer prices fell less than expected for November. However, the Euro showed little reaction to today’s data and has remained range bound against the greenback.
Meanwhile, the Euro lost ground against the greenback yesterday and fell below the 1.23 mark. In a noteworthy development, the EU concluded its two-day meeting yesterday, where it expressed concerns over Greece’s political scenario and announced further sanctions on Russia, banning investments in the Russian annexed Ukrainian regions.
Other Currencies – Highlights
The Swiss Franc lost major ground against the greenback in yesterday’s trading session after the Swiss National Bank introduced negative interest rates amid prospects of deflation in the Euro zone. The move of the central bank was mainly triggered by an excessive fund flow in the Swiss economy, particularly after the recent fall in global crude oil prices and economic turmoil in Russia increased demand for safe haven bets. Separately, data released in Switzerland showed that trade surplus widened for November, as a decline in oil prices reduced the nation’s import bills.
With little on the domestic macroeconomic front, the Swiss Franc is trading in a tight range against the greenback. With speeches by a few US Fed officials scheduled later today, investors in the Swiss Franc-US Dollar pair are likely to remain on their toes in the latter half of the trading session.