Daily Market Report - 03/11/2014

Inflation in the Euro zone edged up slightly in October, reinforcing the view that the European Central Bank will hold fire on any additional policy action at its meeting next week. A first estimate on Friday from the European Union's statistics office showed consumer prices in the euro zone rose by 0.4 percent in October in line with market expectations. A day earlier German data showed inflation in Europe's largest economy slowing in October to 0.7 percent, its lowest reading since May.

Many analysts have said a number of factors meant ECB action as early as next week was unlikely, but that he expected further measures by the first quarter of next year. ECB policy-makers still appear somewhat divided on the likelihood of deflation in the euro area. The central bank's chief economist Peter Praet told Belgian media earlier this week that the possibility was limited stating  "We are not in deflation but we cannot ignore the concrete risk of it".

The statistics office said prices rose fastest for services, up 1.2 percent, followed by a 0.5 percent increase in food, alcohol and tobacco costs.The ECB, which has a mandate to keep inflation below but close to 2 percent, has committed to an expansionary policy, including an asset-buying plan, and has said it will consider further measures if needed.

Data also showed on Friday that unemployment in the euro zone remained unchanged at 11.5 percent in September.

The drop in fuel prices could not  have come at a better time for the U.S economy. Consumer spending unexpectedly dropped 0.2 percent in September, weaker than any economist projected, after rising 0.5 percent in August, according to Commerce Department data issued in Washington. The report also showed incomes rose at a slower pace last month.

The lowest costs at the gas pump in four years and the biggest payroll gains in more than a decade are projected to lift buying power and household purchases heading into the holiday-shopping season. Other reports today showed consumer confidence jumped this month to a seven-year high and manufacturing in the Chicago area picked up, bolstering prospects for a rebound.

Bank of Japan Governor Haruhiko Kuroda today pushed through an expansion of what was already an unprecedented large monetary-stimulus program. The central bank’s board, in a divided 5 to 4 vote, raised its annual target for enlarging the monetary base. The Yen has weakened off significantly over the last couple of days as a result. 

Key Announcements:
09:30 EUR: UK manufacturing PMI (Oct) expected to fall from 51.6 to 51.5   
15:00 USD: US ISM manufacturing PMI (Oct) expected to fall from 56.6 to 56.5   

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