Daily Market Report 17/07/2013

On one of the busiest days this week in terms of fundamental data; inflation from the UK, euro zone and the US took centre stage. The pound was already on the back foot as investors readied themselves for the Bank of England minutes this morning. The UK’s inflation data missed the forecasted levels and the pound immediately lost ground against its peers.

The euro zone was next to publish its inflation data and little movement on the single currency was the result as the expected figures were announced.

Finally, The US posted its inflation and core CPI actually rose to 1.8% surpassing an expected 1.6% forecast. Once again this saw the dollar surge against the pound although these gains were erased fairly swiftly as the afternoon progressed.

The main mover of the day was the euro which strengthened 0.5% against the pound and 0.65% against the US dollar. This news comes as a surprise as Christine Lagarde (Head of the IMF) stated that the economic recovery in the euro zone was uncertain and unconventional monetary policy not just within Europe, but also the UK, US and Japan (referring specifically to quantitative easing) would have to be phased out carefully.

The Bank of England and the Federal Reserve once again though had key figures making their own views known although their perceptions were in strong contrast to one another. The Bank of England’s Paul Fisher stated the tighter monetary policy in the UK could be ‘years away’, where as the Fed’s Esther George said that it is definitely time to reduce quantitative easing program in the US despite being regarded as one of the more conservative members of the Federal Reserve.

Questions will continue to be asked about central bank’s policy until definite changes are announced. There is no way of estimating when these changes will occur and although analysts will try their hardest in an effort to predict future market conditions, uncertainty will still remain king. Will Mark Carney’s comments from 2 weeks ago be consolidated in the minutes released on Thursday morning? If so, the pound could expect further losses.

Key Announcements:

9.30am – GBP – Bank of England Minutes.

9.30am – GBP – Claimant Count Change (Jun): Expected to increase -8.0k.

9.30am – GBP – ILO Unemployment Rate (3M) (May): Expected to remain at 7.8%.

12.00pm – USD – MBA Mortgage Applications (Jul 12): Previously fell by 4%.

13.30pm – USD – Housing Starts (Jun): Expected to improve to 0.960mn.

13.30pm – USD – Building Permits (Jun): Expected to improve to 1.000mn.

14.00pm – CAD – BoC Interest Rate Decision: Expected to remain at 1%.

15.00pm – CAD – BoC Rate Statement.

15.00pm – USD – Fed’s Bernankes Speech.

15.15pm – CAD – BoC Press Conference.

19.00pm – USD – Fed’s Beige Book