Daily Market Report - 14/10/2015

GBP
Britain’s inflation rate returned to negative territory for only the second time since 1960, reflecting weak price pressures that the Bank of England has warned will persist into 2016. Consumer prices fell an annual 0.1 percent after stagnating in August. The ONS said that a smaller than usual rise in clothing prices, and falling motor fuel prices, were the main contributors to the drop in the rate. The CPI rate has been at zero or close to zero for most of this year. It was last in negative territory in April.

Weak inflation data will reinforce the view that the BOE is some months away from raising its benchmark interest rate from a record-low 0.5 percent. The BOE said last week that its near-term outlook for inflation had weakened since August and that price growth will probably stay below 1 percent until spring 2016, well below its 2 percent target. David Kern, chief economist at the British Chambers of Commerce, said they expected inflation to remain at or below 0% for most of this year. "Our forecast is that annual CPI inflation will start to creep upwards early in 2016, but will remain below the 2% target well into 2017," he added.

EUR
The ZEW Indicator of Economic Sentiment for Germany has further declined in October . Decreasing by 10.2 points compared to the previous month, the index now stands at a level of 1.9 points. This decline is much sharper than anticipated with a forecasted figure of 6.1. This is the lowest level it has been since this time last year. ZEW President  said. "The exhaust gas scandal of Volkswagen and the weak growth of emerging markets has dampened economic outlook for Germany. However, the performance of the domestic economy is still good and the Euro area economy continues to recover. This makes it rather unlikely that the German economy will slide into recession."

Consumer prices in Germany in September 2015 were on the same level as in September 2014. The inflation rate  fell to 0.0% in September 2015 from 0.2% in the previous month. The low inflation rate was due mainly to the decrease in energy prices. Eurostat first estimate states the Eurozone economy grew by 0.3% which marks a slight slowdown from the 0.4% registered in the first quarter.

Key Announcements
09:30 – GBP:  Average Earnings Index 3m/y – expected to increase to 3.1% from a previous reading of 2.9%
09:30 – GBP: Claimant Count Change – expected to decrease to -2.3K from a previous reading of 1.2K
13:30 – USD:  Retail Sales m/m – expected to remain the same at 0.2%