Daily Market Report - 01/12/2014

The annual pace of house price growth in the UK continued to soften in November, falling from 9.0% in October to 8.5%, marking the third consecutive month where annual growth has moderated. This is despite house prices increasing by 0.3% month on month in November. 

Inflation in the Eurozone slowed in November to  a five-year low, prodding the European Central Bank toward expanding its unprecedented stimulus program.  Consumer prices  however, rose 0.3 percent from a year earlier. That was in line with median forecasts. Unemployment held at 11.5 percent in October.

Continued low inflation is keeping pressure on the ECB to add to its existing package of measures aimed at reviving the economy. While the slowdown is partly related to a drop in oil prices, the euro-zone area economy is struggling to reach the 2% targets set by the ECB. Continued low inflation is keeping pressure on the ECB’s Governing Council to add to its package of measures aimed at reviving the economy. Core inflation stayed at 0.7 percent in November. The only comfort for the ECB is that the renewed drop in inflation was entirely due to an increased year-on-year drop in energy prices. 

The ECB is already buying covered bonds and asset-backed securities as it expects to bring its balance sheet back to the level it had at the beginning of 2012. This comes after it cut interest rates to record lows and offered long-term loans to banks to fuel credit. 

Time is needed for the “positive effects” of the current stimulus to be felt, Draghi said Friday. “However, should it become necessary to further address risks of low inflation, the Governing Council is unanimous in its commitment to using additional unconventional instruments within its mandate.” 

At  9:30 am we have Manufacturing PMI figures from the UK.  Should the figures meet forecast of 53.1, we should see some GBP strength.   This afternoon  we have ISM Manufacturing PMI from the US, these are forecast to come in at  58.0 which will represent a fall from last t months figure so we could see some USD weakness if the data is not positive. 

Key Announcements:

09:30- GBP: UK Markit Manufacturing PMI (Oct) expected to be lower at 53.1 from 53.2
09:30- GBP: UK Mortgage Approvals (Oct) expected to be lower at 59,750 from 61,267 
15:00- USD: ISM Manufacturing PMI (Nov) expected to be lower to 58 from 59

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