Daily Market Report - 12/11/2014

Ahead of today’s headline inflation figure for the UK, yesterday’s papers speculated that the quarterly report is likely to cement the view that interest rates will remain on hold at 0.5% until well into 2015, after the UK general election. Earlier this year a hike had been expected as soon as this month but stagnating wages and low inflation, added to the effect of weakness in the Eurozone, persuaded the Bank to keep the figure at record lows. 

Despite the US being on a bank holiday for Veterans Day, in yesterday’s news Boston Federal Reserve bank president Eric Rosengren discussed the Feds fight for higher inflation. He believes the Fed should fight low inflation as vigorously as it would a too rapid run-up in prices or risk the same sort of prolonged slow growth plaguing Japan and Europe. Failure to get inflation to the Fed’s 2 % target, raised the risk that investors and consumers would slip into deflationary thinking, changing their spending and investment patterns in ways that would further undermine growth.

He repeated his call for the Fed to remain patient in raising rates until it is more certain that inflation will rise to the Fed's target after last month ending one of its major crisis response programs when it stopped adding to its monthly holdings of Treasury bonds and mortgage-backed securities. 

Just days before Germany's much anticipated third quarter gross domestic product (GDP) data is released Friday, the chair of the German Banking Association, Juergen Fitschen, yesterday warned that the euro zone's largest economy has lost its competitiveness and is on the brink of a recession.He said that it was "undeniable that we have slowed down recently." Fitschen's comments came amid other severe critiques of the German economy and outlook, just days before the headline figure. 

Analysts will be keeping an eye on the GDP figure as second quarter data in August showed Germany's economy had lost momentum, contracting for the first time in over a year. 

Key Announcements:

09:30 GBP: ILO Unemployment Rate 3M (Sept) expected to fall from 6.0% to 5.9%   
10:30 GBP: BoE releases their quarterly inflation report    

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