Daily Market Report 04/01/13

Debt ceiling may cramp US momentum

Last night during the Fed minutes, the topic of the US debt levels emerged as one of the principal discussion points. With the debt ceiling rapidly approaching and following a fiscal cliff deal which did little to curb the US’ indebtedness, the Fed felt necessary to look at the potential of ending their flows of quantitative easing by the end of 2013.

Previously Ben Bernanke and his panel have been advocates of asset purchasing programs and unconventional monetary easing tools such as the US’ Operation Twist. However as pressure mounts, particularly from Republicans with regards to the height of the debt ceiling, the Fed may be forced to reassess what they can do to stimulate the economy.

Resultantly, with less QE potentially on the horizon and with a new fiscal cliff deal to be negotiated in February, the previous momentum that America has been building could look under threat as borrowing rates rise in a slightly more austere environment. On the back of this news investor risk appetite has erased the previous weakness seen in the wake of the fiscal cliff.

Flooding back into the greenback, dollar buyers may have missed their opportunity to purchase dollars at such weak levels. This may be good news for euro buyers as the uncertainty in the market may weaken the shared currency, though today a plethora of data released in Europe could hold influence on where the rate will hold.

 

Today’s Key Announcements
  • 07.00am – EUR – German Retail Sales m/m: large increase to 1.2%
  • 08.15am – EUR – Spanish Services PMI: increased to 43.7
  • 08.45am – EUR – Italian Services PMI: slightly up at 45.6
  • 09.00am – EUR – Final Services PMI: remained at 47.8
  • 09.30am – GBP – Services PMI: marginal increase expected to 50.4
  • 09.30am – GBP – Net Lending to Individuals m/m: expected to increase to 0.4b
  • 09.30am – GBP – Mortgage Approvals: expected to increase to 54.2k
  • 10.00am – EUR – CPI Flash Estimate y/y: expected slightly down to 2.1%
  • 13.30pm – USD – Non-Farm Employment Change: expected at 150k
  • 15.00pm – USD – ISM Non-Manufacturing PMI: expected at 54.2
  • 15.00pm – USD – Factory Orders m/m: expected at 0.3%