Daily Market Report - 05/11/2015

Yesterday we saw U.K. service sector activity expand at a faster rate than expected in October. This boosted optimism over the health of the economy has supported the case for a hike in interest rates. Markit said the seasonally adjusted Services Purchasing Managers Index increased to 54.9 last month from a reading of 53.3 in September. It was expected to rise to 54.5 in October.

Despite this improvement, the rate of expansion was still the second-weakest since May 2013. Input price inflation slowed to one of the weakest rates of the past six years, and charges levied by service providers rose only marginally. The Pound remained higher against the euro, with EUR/GBP down 0.4%.

Non-farm private employment raised more than expected in October. Non-farm private employment rose by a seasonally adjusted 182,000 last month, above expectations for an increase of 180,000. The economy created 190,000 jobs in September however the figure was revised lower from a previously reported increase of 200,000.

Yesterday it was announced the goods and services deficit was $40.8 billion in September, down $7.2 billion from $48.0 billion in August. 

The euro fell to its lowest level in three months yesterday as a strong reading on service-sector growth and dovish comments from Federal Reserve Chairwoman Janet Yellen helped support the dollar against its rivals. Mario Draghi defended the central bank’s willingness to expand its program of monetary easing.  

Markit's final October Composite PMI for the euro zone came in at 53.9, weaker than an earlier estimate of 54.0 but still above September's four-month low of 53.6. Euro zone industrial producer prices recorded the steepest annual decline since January in September and consumer prices were flat year-on-year in October, maintaining pressure on the ECB to further loosen monetary policy.

Key Announcements

GBP: 09:30 – Bank of England Quarterly Inflation report
EUR: 10:00 – Retail Sales (MoM) (Sep) Expected to rise to 0.2% from 0.0%
GBP: 11:00 – BoE Asset purchase Facility Expected to stay the same at £375 Billion
GBP: 11:00 – BOE Interest Rate Decision Expected to stay the same at 0.5%
GBP: 11:00 – BOE Monetary Policy Statement
GBP:12:45 – BOE’s Governor carney Speech
USD:13:30 – Initial Jobless Claims (Oct 30) Expected to rise to 264K from 260K