Daily Market Report 15/08/2013

Wednesday observed the pound reach new highs against the euro since July 4th in part due to the pounds better than expected employment data. Claimants of benefits fell with the overall claimant count at 4.3% down from 4.4%. The overall unemployment rate remained constant at 7.8% which is more prevalent now than before as the Bank of England have issued their forward guidance; linking interest rates with the labour market.

The pounds serge against the euro was not even halted by the euro zone GDP data that officially saw the EU out of recession. Both French and German GDP exceeding expectations wildly as the overall growth figure was published at 0.3% compared to the previous quarter’s -0.3%.

Despite the calibre of the data revealed on Wednesday the currency markets remained relatively flat. If you look back at when the UK officially left recession, the pound rallied significantly however the euro’s reaction was much more muted. Two main reasons for this firstly, the markets have most likely been pricing in a euro zone recovery as various euro figures over the last 6 weeks have surpassed expectations and secondly, the US QE program that continues to dominate market sentiment will have played on the minds of investors as global volatility threatens to take hold whenever the Fed decides to taper of the current QE levels.

The US posted their own inflation data in the form of the Producer Price Index that rose less than expected to 2.1%. This is another key factor that the Federal Reserve will consider along with their CPI and employment statistics before they consider scaling down the QE in the States. Thursday will see the CPI data released which will once again ignite debate over exactly when the Fed will reduce their QE program.

Thursday also sees the UK publish the retail sales for July which are expected to increase. This increase can be partly attributed to the good weather that occurred in July. This data ends the week for the UK with the focus once again moving to the USA as Industrial production, housing starts, initial jobless claims and the university of Michigan confidence survey round off a busy week for the US.

Key Announcements:

9.30am – GBP – Retail Sales (Jul): Expected to increase to 2.5%.

13.30pm – USD – Consumer Price Index (Jul): Expected to rise to 2%.

13.30pm – USD – Initial Jobless Claims: Expected to increase to 335,000.

13.30pm – USD – NY Empire State Manufacturing Index (Aug): Expected to increase to 10.

14.15pm – USD – Industrial Production (Jul): Expected to remain at 0.3%.

15.00pm – USD – Philadelphia Fed Manufacturing Survey (Jul): Expected to fall to 15.