Daily Market Report 09/01/13

Data gives food for thought for future ECB rate cuts

As the euro zone’s unemployment rose to the highest since the single currency’s inception and coupled with both worse retail sales and German factory order figures, the euro strengthened against the pound as murmurs that an ECB rate cut was not likely for Thursday, whilst negative sentiment towards the UK’s own progress weighed sterling down against almost all of its peers.

Questions must continue to be asked about the euro zone’s direction, as Angela Merkel came under fire for the worrying trajectory of Europe’s stalwart economy. German industrial production data released this morning will offer further insight into the health of the economy, with a drastic improvement from last month’s negative growth is expected.

Should the results return much worse than analysts’ prediction, pressure may mount on the ECB to give further consideration to a rate cut. The consensus shows that a reduction in the borrowing rates are not expected tomorrow, however speculation that one is in the offing could cause movement. Normally a rate cut in a currency prompts weakness, however in recent months the euro has proved inconsistent; any signs the economy could recover may increase risk sentiment on the continent.

In the US news about the fiscal cliff has died down as Obama rebalances the unpopular current congress. In the UK today we have trade balance data that will either confirm the currently gloomy outlook on the economy, however if a positive result comes out it would be a pleasant surprise following yesterday’s weak pound.

 

Today’s Key Announcements
  • 09.30am – GBP – Trade Balance: expected at -9.1B
  • 10.00am – EUR – Final GDP q/q (revised): expected to remain at -0.1%
  • 11.00am – EUR – German Industrial Production m/m: expected to increase from -2.6% to 1.1%
  • 18.00am – USD – 10y Bond Auction