Market Awaits UK Inflation Data
The Rightmove housing market report released earlier today offered further evidence that the UK housing market is slowly losing momentum. Going forward today, the CBI industrial trends survey will attract some attention among Sterling investors. However, the main focus remains on tomorrow’s consumer price inflation data especially considering the recent concerns raised by the BoE about the nation’s inflation outlook.
Across the Atlantic, today’s industrial production data is expected to show a rebound for November, thereby raising hopes of a strong manufacturing performance for the final quarter of 2014. Additionally, market participants will eye the NAHB report in the US to gauge the health of the housing market for December.
Pound Sterling – UK Markets
Data released earlier today revealed that house price growth in the UK slowed for December, suggesting that Britain’s housing market is seemingly now under control. The sector is not anticipated to be a major concern for Sterling investors in the near term, as the BoE, in its bulletin for the fourth quarter, indicated that Britain’s high housing market debt is unlikely to be majorly impacted by an increase in interest rate up to two percentage points.
Meanwhile, the Pound is trading in a tight range against the majors this morning ahead of the UK CBI industrial trends survey due later today. With crucial macro updates scheduled in the UK tomorrow, Sterling is anticipated to witness some volatility against its key peers. Traders will keenly eye November’s consumer price inflation data in the UK, considering the BoE’s concern that inflation in the nation is likely to fall below the 1% mark going forward. Furthermore, investors will keep a tab on the financial stability report and bank stress test results in the UK to gauge the impact of Euro zone’s weak macro health on the timing of an interest rate rise in the nation.
US Dollar – US Markets
On Friday, the greenback failed to gain any support from the mixed domestic economic data and lost ground against the Euro. A report showed that producer prices in the US dropped more than expected for November, mainly led by the recent plunge in gasoline prices. However, the core measure of producer price inflation remained in line with market estimates, raising hopes that domestic spending remained well supported by lower energy expenses last month. Against this backdrop, investors will eye this week’s crucial consumer price inflation numbers for November to gain a better insight into the nation’s inflation trend. Meanwhile, the preliminary Reuters/Michigan survey released on Friday revealed that US consumer confidence improved more than expected for December and reached close to its pre-recession highs, as the pre-festive optimism kept sentiment supported for the last month of 2014.
Going forward, markets will keep an eye on US industrial production data scheduled later today which is expected to show a rebound for November and strengthen prospects of an encouraging economic performance for the last quarter.
Euro – European Markets
The Euro moved higher against the greenback and the Pound on Friday and crossed the 1.24 and the 0.79 mark, respectively. Data released in the Euro zone showed that growth in industrial production slowed more than anticipated for October. Amid recent mixed economic reports and last week’s weak response to TLTRO auctions, traders will continue to look for hints from the ECB to gauge prospects of a sovereign bond buying programme in the Euro zone. Separately, in a noteworthy development, Fitch Ratings cut France’s credit rating to AA from AA+ amid concerns over the nation’s fiscal health.
With little on the domestic macroeconomic front, the common currency is trading in a tight range against its key counterparts this morning. Going forward, market participants will keep a tab on tomorrow’s flash manufacturing and services PMI readings across key European nations for further direction to the Euro-US Dollar pair. Considering its importance in ascertaining the health of the region’s domestic activity, any downside surprise in these PMI readings is likely to weigh on the common currency against the majors.
Other Currencies – Highlights
Market participants cheered the Japanese Prime Minister, Shinzo Abe’s victory in the snap election held during the weekend, thereby leading the Japanese Yen to move higher against the greenback. However, gains in the Japanese Yen proved to be short-lived as investors shifted their focus on to the fundamentals following the release of downbeat domestic economic reports. Data revealed that the Bank of Japan unexpectedly lowered the outlook for the nation’s manufacturing activity for the fourth quarter. With the Japanese economy showing little signs of revival following the recently introduced stimulus measures by the BoJ, the prospects of a prolonged recession in the nation cannot be ruled out.
With crucial monetary policy meetings scheduled in the US and Japan later this week, the US Dollar-Japanese Yen pair is likely to witness some volatility in the next few trading sessions.