Daily Market Report 17/04/2013

Tuesday’s data revolved around inflation data from the UK, euro zone and the US. The UK’s inflation remained above the 2% target as expected. The euro zone inflation dropped to the lows last seen in August 2012 although Mario Draghi re-iterated his stance that the euro zone recovery will not gather any momentum until the latter half of 2013. Despite all of this data, the market had an incredibly muted reaction for the majority of the day.

Movement on GBPEUR throughout Tuesday afternoon favoured euro sellers leading to levels not seen since March 20th. Investors were also keen to see how the IMF viewed the global economic recovery however the overall sentiment was negative. Once again growth forecasts were slashed in the UK, the euro zone and the US for 2013 however only the UK suffered a more damning downgraded forecast for 2014.

The prices of commodities especially gold and crude oil have also been hitting the headlines recently. The price of gold suffered its biggest daily loss in 30 years on Monday and fears that this would lead to a mass selloff are still prevalent.

Commodity currencies including the South African Rand, Australian dollar and New Zealand dollar have all weakened further and in light of further economic uncertainty, last week’s bullish market sentiment would appear to have stalled somewhat. Inevitably the tragedy in Boston will have had an impact on investor’s and at a time when volatile markets still breed fear, risk appetite can diminish rapidly.

We did see a surprise move on the US dollar yesterday as the US inflation figure fell below expectations and industrial production rose 0.4% in March. The fall in inflation once again gives less scope for the Fed to reduce their current monetary policy and the rise in industrial production enticed investors out of the US dollar and into the euro and the pound. GBPUSD finished 0.43% higher on the day.

Following the UK’s lack of positive data of late, all eyes will be on the Bank of England as they release the minutes from the April’s MPC meeting. The expectation is once again that the 9 members will have kept the same voting pattern as last month but any change could have an impact albeit this announcement will be hugely overshadowed by the official UK GDP figure that is due next week.

Finally, the UK employment figures will be announced and in light of the IMF’s downgraded growth forecasts, disappointing data here will surely lead to a further sterling sell off.

Key Announcements:

9.30am – GBP – Bank of England Minutes.

9.30am – GBP – Claimant Count Change (Mar): Expected to improve to no change from -1,500 in the previous month.

9.30am – GBP – ILO Unemployment Rate (Feb): Expected to remain at 7.8%.

15.00pm – CAD – BoC Interest Rate Decision: Expected to remain at 1%.

15.00pm – CAD – BoC Rate Statement and Press Conference.

19.00pm – USD – Fed’s Beige Book.