Daily Market Report 06/02/2013

Sterling was once again at the mercy of the markets yesterday as the National Institute of Economic and Social Research cut the UK’s growth forecast and warned of a protracted recovery.

Despite UK services figures beating market expectations and rising to 51.5 last month from a reading of 48.9 in December, the pounds weakness was exacerbated further by the continuing speculation that Mark Carney will expand monetary policy when he takes over as governor in July. Mark Carney is due to testify in front of the Treasury Select Committee this Thursday.

Mixed data from Europe showed that euro zone services figures rose to 48.6, beating expectations of a reading of 48.3. However data released showed euro zone retail sales fell by 0.8% in December, worse that the market expectations of a 0.5% contraction. The euro, however, drew support and strengthened as the ECB’s balance sheet shrank to its smallest in almost a year and speculation mounted that ECB policy makers aren’t concerned by French Presidents Francois Hollande’s warning that a rising euro will slow the economic recovery.

In the US, the non-manufacturing purchasing managers’ index fell to 55.2, lower than the consensus of 55.8. Also the Congressional Budget Office reported that the US federal budge should narrow to US$845 billion this year.

Overnight we saw the Australian dollar decline following an unexpected drop in retail sales adding to prospects the Reserve Bank will cut interest rates next month.
Figures this morning showed UK house prices increased by only 1.3%, below the expectation of a 1.5% increase.

Key Announcements:

11.00am – EUR – Germany Factory Orders: Expected to decline by 1.2%.

12.00pm – USD – MBA Mortgage Applications: Figures for the prior month were -8.1%.

15.00pm – CAD – Ivey Purchasing Managers Index: Expected to increase 53.6.

21.45pm – NZD – Employment Change: Expected to increase by 0.4%.

21.45pm – NZD – Unemployment Rate: Expected to decrease to 7.1%.