Daily Market Report 16/10/12

Problems within Spain, Greece and, to a lesser extent, Cyprus have been prominent within the euro zone for a long period. Despite this, the nations continue to suppress their cries for help in order to prevent further debilitating austerity requirements that have already caused widespread riots.

Yesterday however, troika rumours surfaced that next month all three Mediterranean nations could receive the finances that would rebalance their respective bond yields. Stocks rose on this news, although the euro traded fairly flat after earlier gains from the news was offset by investor recognition that any action is still in the distance.

Yesterday data showed the indication that Ben Bernanke’s much-criticised QE3 programme is now bearing fruit, as US retail sales increased by more than expected. Coming in at 1.1%, it is the first time that the economy's retail sales have seen consecutive months above 1% for three years. The improving economic picture is likely to result in greater risk appetite as investors search for greater gains elsewhere.

The expected trend for short-term euro strength and dollar weakness is set to continue, though it must be noted, the adrenalised charge of investors between bullish fights or bearish flights can cause swings in and out of the riskier currency.

Today the UK’s inflation rate is set to return closer to the Bank of England’s two per cent target. This result may clear the way for looser monetary policies going forward, as the MPC tries to propel the economy away from stagnation.

Key Announcements Today:
  • 09.30am – GBP – CPI y/y: expected to lower towards the 2% target at 2.2%
  • 10.00am – EUR – German Economic Sentiment: expected contraction
  • 10.00am – EUR – CPI y/y: expected to remain constant at 2.7%
  • Tentative – GBP – BOE Inflation Letter
  • 13.30pm – USD – Core CPI m/m: marginal increase to 0.2%
  • 14.15pm – USD – Industrial Production m/m: slight growth expected at 0.2%