Daily Market Report - 17/09/2014

GBP:
Late yesterday the pound rallied after a series of polls released suggested the no campaign is now narrowly ahead, by 52% to 48%. But the polls by the Daily Telegraph and Daily Mail and showed a small movement to yes in recent days, though they placed the no side ahead within the specified margin of error. Betting agency Betfair also paid out on the “no” votes early yesterday, suggesting they expect Scotland to stay with the UK.

The annual rate of UK inflation fell from 1.6% to 1.5% in August. The Office for National Statistics (ONS) said falling food and non-alcoholic drink prices were behind much of the slowdown in inflation. That echoed business reports indicating that a fierce supermarket price war had brought down food prices. This means the Bank of England remains under little pressure to raise interest rates in order to keep CPI inflation at or below its target rate of 2%. While inflation is now back to its lowest reading in five years, consumers are still feeling the pinch as wage growth is still well below inflation.

The Office for National Statistics reported that houses in the capital are now 39.7% higher than the pre-financial crisis peak in January 2008. London is unsurprisingly the English region with the highest average house price at £514,000 and the North East had the lowest average house price at £156,000. This figure will dampen claims that the market is cooling and maintain pressure on the government and the Bank of England to act to contain house price inflation

EUR:
German investor confidence dropped to the weakest in 21 months amid increasing political tension in Europe, even as the European Central Bank steps up its stimulus. The ZEW Centre for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, fell to 6.9 in September from 8.6 in August. That’s lowest level since December 2012. 

The consensus amongst economists was for the figure to be as low as 4.8 compared to last month’s 8.6, the actual figure was 6.9 causing euro to loss its early gains on GBP. This is a further blow to Europe’s largest economy and suggests there could be further contraction in the German economy that is likely to cause more weakness in the Euro currency. 

Key Announcements:

09:30 BST - GBP: Bank of England minutes

09:30 BST - GBP: Bank of England MPC vote change expected to be 7-2 in favour of no change 

09:30 BST - GBP: UK unemployment rate 3M to July expected to fall to from 6.4% to 6.3%

10:00 BST - EUR: Eurozone inflation (CPI) August expected to fall form 0.4% to 0.3%

13:30 BST – USD: US Inflation (CPI) August expected to be higher from 0.1% to 0.2%

19:00 BST – USD: US federal reserve interest rate decision expected to stay at 0.25%

19:00 BST -  USD: US Federal Reserve Monetary policy statement 

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