Daily Market Report 17/09/2013

The surprising news on Sunday night that Lawrence Summers has ruled himself out of the running for chairmanship of the Federal Reserve continued to dampen demand for the US dollar yesterday.

Summers was one of the more hawkish members of the Federal Reserve and as a result was perceived to be in favour of reducing the Fed’s current monetary policy.  The new favourite, Janet Yellen, is seen to be more dovish about the US economy and is thought to be favour in keeping monetary policy loose, favouring job creation instead.

In a speech last night, President Obama perhaps echoed Yellen’s concern over the US economy by suggesting that it wasn’t growing as fast as it should be and that not enough jobs were being created in the current budget sequester. With regards to the debt ceiling, Obama commented that Congress must pass a budget without threatening the country’s inability to pay back its bills.

Economic data from the US yesterday showed that industrial production grew by 0.4%, its highest in six months; due to an increase automobile production. However the New York State Manufacturing index fell to a four month low in September.

In the euro zone, Mario Draghi reiterated his recent comments by stating the subdued inflation outlook will put pressure on the ECB to keep interest rates at 0.5% or to possibly even lower it. Indeed data which was released yesterday morning showed that inflation fell from 1.6% to 1.3%.

Inflation rates are forecasted to decrease for the both the UK and the US today also to 2.7% and 1.6% respectively. The latest ZEW Survey from Germany is set to suggest that economic sentiment increased to 46 in September. We would ordinarily expect the euro to strengthen off the back off the data but given that we have the German elections on Sunday 22nd September, markets may well be cautious on euro moves.

Key Announcements:

9.30am – GBP – Consumer Price Index (Aug): Expected to fall to 2.7%.

10.00am – EUR – ZEW Survey of Economic Sentiment (Sep): Expected to rise to 46.

13.30pm – USD – Consumer Price Index (Aug): Expected to fall to 1.7%