Daily Market Report 06/11/2013

GBP 

The pound continued to be buoyed yesterday as data revealed that UK service sector activity, which makes up 70% of total GDP, grew at its fastest rate since May 1997. Along with last months impressive manufacturing and construction figures as well, the data suggests, according to Markit, that the UK is growing at a rate of 1.3% for the fourth quarter, from 0.8% in the third quarter. 

Data from the UK’s manufacturing and industrial sector also showed that output increased further in September, lending to further support for the pound this morning. 

Recent data may cause the Bank of England to raise its growth forecasts for the UK and may even prompt members of the MPC to bring an interest rate closer. The BoE is scheduled to release their latest interest rate decision this Thursday. 

EUR 

The euro began the day on the back foot following data showing that the number of additional unemployed people in Spain for the month of October increased by almost 3 ½ times more than in September. 

The euro continued to fall after the European Commission downgraded its growth forecasts for the Eurozone to 1.1% from 1.2% for 2014. The Commission also raised their concerns at the level of unemployment, predicting for the unemployment rate to hit 12.2% by the year end. 

Producer price inflation also fell by 0.9% for the month of September. 

Service sector figures from France, Germany and the Eurozone have all beat expectations this morning but activity has dropped since September. 

USD 

The US dollar drew some support as America’s service sector grew more that expected in October to 55.4 from 54.4 in September, despite the government shutdown. Gain in the US dollar, however were limited ahead of the key labour market data due to be released on Friday showing that the unemployment rate is set to have increased to 7.3% in October. 

CHF 

The Swiss franc came under further pressure following data revealing that the rate of deflation increased further to 0.9% for the month of September. 

NZD 

New Zealand’s rate of unemployment fell more than expected in the third quarter to 6.2% from 6.4% in the second quarter. The data adds to the recent optimism echoed by the Reserve Bank of New Zealand’s Governor and may put pressure on the RBNZ to hike up interest rates in the first half of next year. 

Today 

Data this morning is expected to show Eurozone retail sales and German factory orders are expected to have improved in September, but movements in the euro could well be minimal especially ahead of tomorrow’s interest rate decision and subsequent press conference by Mario Draghi. 

The pound should continue to be supported so long as data shows that manufacturing and industrial output increased in September. The NIESR is also set to release its latest GDP estimate for the UK. 

Key Announcements:

10.00am – EUR – Retail Sales (Sep): Expected to increase by 0.7%. 

11.00am – EUR – German Factory Orders (Sep): Expected to increase by 0.7%. 

13.30pm – CAD – Building Permits (Sep): Expected to increase by 6%. 

15.00pm – CAD – Ivey Purchasing Managers Index (Oct): Expected to increase by 54.7.

15.00pm – GBP – NIESR GDP Estimate (Oct): Previous estimate at 0.8%.