Daily Market Report 15/03/2013

In the UK a very vacant economic calendar would appear to have left the pound wide open to additional sell-offs. Although recently one may be forgiven for thinking that no news is good news.

Producer price index data was meant to steal the majority of the limelight and up until 3pm GMT, an expected 0.7% figure had no real impact. The downtrend on cable seemed to have made itself very comfortable below 1.50. However, late in the afternoon trading session the pound began gathering momentum gaining 1.1% against the dollar. The pound also retook valuable ground against the majority of its peers including 0.7% against the euro and even 0.25% against the Australian Dollar despite very positive Australian unemployment data from earlier in the day.

So what was the reason for this rally? At a time when the UK is screaming out for some positive economic news, it would appear that sterling strength came from the most unlikely of places…Qatar. Unconfirmed reports suggest that UK and Qatari ministers and officials have held talks on potential projects.

In an interview with ITV last night, Bank of England Governor Mervyn King called for a halt in the decline of the pound stating that “We are moving to a properly valued exchange rate”. This is an abrupt change of tone from King, who ever since autumn 2012 has been talking down the pound. Regarding the economy, King commented that momentum behind the recovery was well on its way.

However, the overall downtrend of the pound is still very much in place and with the potential for interest rate cuts in the UK twinned with additional fiscal stimulus. A weakening pound will require much more than a whisper of International Investment and comments by Mervyn King to really change its fortunes.

Today, the euro zone is expecting its inflation figures whereas the US will be hoping for positive data surrounding its Industrial Production and additional inflation data in the form of the consumer price index.

Key Announcements:

10.00am – EUR – Consumer Price Index (YoY) (Feb): Expected to fall to 1.8%.

11.00am – GBP- MPC Member Dale Speech.

12.30pm – USD – Consumer Price Index (YoY) (Feb): Expected to rise to 1.9%.

13.00pm – USD – Net Long-Term TIC Flows (Jan): Previous figures were at US$64.2bln.

13.15pm – USD – Industrial Production (MoM) (Feb): Expected to rise to 0.4%.

13.55pm – USD – Reuters/Michigan Consumer Sentiment Index (Mar): Expected to rise to 78.