Daily Market Report 11/02/2013

Sterling rose against all but one of its 16 major peers on Friday amid speculation that the Bank of England may refrain from further stimulus.

Incoming BoE governor Mark Carney’s suggestion on Thursday that current monetary stimulus may be sufficient to support the economy, seemed to buoy the pound as investors scaled back their expectations of further stimulus.

Despite better than expected trade balance data from Germany and industrial production from Italy, the euro continued to weaken following ECB president Mario Draghi’s comments that the euro’s recent appreciation could slow the euro zones economic recovery.

Data from the US on Friday showed that the trade deficit narrowed to the smallest since January 2010, fuelling hopes that fourth quarter growth estimates may be revised upwards.

Figures released on Friday also showed an unexpected drop in employment in Canada fuelling concern that the economy is slowing. The Canadian dollar also fell as prices of its biggest export, oil, fell for the first time in nine weeks.

With little data due for release today, markets may be fairly subdued today. We suggest to clients to use the pounds recent gains to their advantage before the key risk events this week; inflation figures tomorrow, the inflation report on Wednesday and UK retail sales figures on Friday, which could prove to cause some volatility in trade.

Key Announcements:

18.00pm – USD – FOMC Member Yellen Speech.

21.15pm – CAD – BoC Gov Council Member Lane Speech.