Daily Market Report - 06/01/2015

GBP
Yesterday crude oil dropped to its lowest level since may 2009 with Iraqi and Russian oil exports at near 35 year highs. Lower oil prices will continue to drop inflation expectations and reduce the likelihood of an interest rate rise in the UK.

It was a quiet news day in the UK however there was an analysts report out  regarding their view on 2015. Roughly 400,000 jobs are expected to be generated throughout the year, decreasing the unemployment rate down to its pre-recessionary levels. Economist have forecast that unemployment will fall to 1.7m, falling back to the rate of 5.2% which has not been seen since before the recession. Average weekly earnings are also anticipated to grow by 2.5% potentially surpassing inflation for the whole of 2015.

EUR
Yesterday we saw the Euro reach 9 year lows mainly on the back of rumours relating to a Greek exit from the Eurozone. Germany’s government has insisted it wants Greece to stay in the Eurozone and will not be blackmailed into amending the terms and conditions of the country’s bailout. There has been rumours that the German government have tried to manipulate the outcome of the Greek election with its warnings, but experts have advised that this could have consequences if Greek voters decided to call the German government’s bluff. According to experts, a Greek exit, would be immensely expensive to Germany in particular, and could destabilise the Euro even further.

Also in Europe, lower German inflation brought further pressures for the ECB to introduce QE. The decline in German inflation has increased expectations that the European Central Bank will start buying government bonds to support prices in the Eurozone and the consensus from various analysts suggests there is a good chance of further falls in inflation in the coming months, which again poses the chance for further Euro weakness.

Key Announcements:
09:30 – GBP: UK Services PMI (Dec) expected to fall from 58.6 to 58.5
15:00 – USD: ISM Non manufacturing PMI (Dec) expected to fall from 58.2 to 59.3

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