Daily Market Report 14/11/2013

GBP

The pound rose against all its peers yesterday after the Bank of England bought forward the date they expect the UK unemployment rate to fall to 7% to the third quarter 2015. As part of the BoE’s forward guidance plan, UK unemployment needs to be 7% before the BoE decide to hike up interest rates. 

The BoE also raised their GDP forecasts to 1.6% from 1.4% for 2013 and to 2.8% from 2.5% for 2014. 

UK data showed that the number of people filing for jobless claims fell more than expected to 41,700 in October and the ILO unemployment rate in the three months leading up to September fell to 7.6%, the lowest in three years. The data adds to recent data that the UK recovery is well on its way.

EUR

Demand for the euro dampened following data showing that industrial production fell more than expected by 0.5% in September from a month earlier. 

The euro also fell following comments made by ECB executive board member Peter Praet that the ECB could cut interest rates to below zero or undertake quantitative easing in order to lift inflation closer to its target of just below 2%. 

USD

The US dollar weakened against most of its counterparts following comments made by Federal Reserve chairman nominee Janet Yellen. 

Yellen stated that the US economy and job market were far short of their potential and thus an improvement must be seen before the Fed pulls the trigger in reducing quantitative easing. 

JPY 

GDP figures for the third quarter showed that Japan’s economy grew slower in the third quarter to 1.9% from a previous figure of 3.8%. As a result, GBPJPY is now trading at a four year high. 

Today

After sterling’s strong performance yesterday, further moves higher could well be muted as UK retail sales data due for release today for the month of October are expected to stagnate. 

GDP figures from the Eurozone will be in focus this morning also with the growth for the third quarter expected to decline marginally to 0.2%. Data already released this morning has been mixed, with France contracting by 0.1% in the third quarter and Germany’s economy expanding by 0.3%, in line with forecasts, but lower than the second quarter’s growth. 

In the US Janet Yellen is expected to make another speech in the afternoon and data from the job market is expected to show that the number of people filing for jobless claims is expected to fall by 6,000 from the previous week, which may well give the US dollar some support. 

Key Announcements:

9.30am – GBP – Retail Sales (Oct): Expected to stagnate at 0%. 

10.00am – EUR – Gross Domestic Product (Q3): Growth expected to slow to 0.2%. 

13.30pm – USD – Initial Jobless Claims: Expected to fall to 330,000.

13.30pm – USD – Trade Balance (Oct): The deficit is expected to increase to US$39bn. 

15.00pm – USD – Janet Yellen Speech.