Daily market report - 13/03/2015

The Dollar strengthened yesterday after the number of Americans filing for unemployment benefits declined more than forecast last week, returning to a level that’s consistent with an improving labour market. The slump in claims indicates the elevated readings in previous weeks were probably due to companies temporarily dismissing workers because of inclement winter weather, rather than underlying weakness in the labour market in another great sign for the US economy. 

Employers in February added more workers than forecast and the jobless rate declined to the lowest level in almost seven years, the Labour Department said last week. The other piece of data out showed retail sales unexpectedly declined for a third month in February, although the weather was blamed for this month’s decline. 

Yesterday, Mark Carney sought to allay fears that Britain faces a 1930s-style deflationary spiral after inflation fell last month to 0.3%, saying that the strength of the UK recovery meant inflation would return to its 2% target within the next two years.
Carney said that despite being buffeted by global forces pushing down prices, the return of inflation-busting wages would push up domestic demand and prices, forcing Threadneedle Street to raise interest rates.

Carney said inflation was likely to sink further over the coming months, delaying a much expected rise in interest rates and forcing the Bank’s monetary policy committee (MPC) to be alive to the possibility of a deflationary spiral becoming entrenched. He said the cause was the steep fall in oil prices and the rising value of the pound allied to weak growth in China and the eurozone.

We did not see any fresh news for Greece during yesterdays session,  Prime Minister Alexis Tsipras again tried to reassure Euro-zone partners that Greece would stick to an extended bailout agreement with its international creditors even as a war of words rumbled on between Athens and Berlin. Tsipras used a visit to the Paris-based Organisation for Economic Cooperation and Development to make his case for a long-term restructuring of Greece's debt while promising to implement agreed reforms.

Key Announcements:
USD – 12:30:US Producer Price index (Feb) YoY expected to be unchanged at 0% growth

Our dealers are available via e-mail (dealers@rationalfx.com) or by phone (020 7220 8181).