Daily Market Report 17/12/2013


The euro continued to strengthen yesterday following data from Markit revealing Eurozone manufacturing grew at a faster pace than analysts were expecting and the PMI monthly composite report (combination of both manufacturing and services) also grew faster than expected.

However a breakdown of the figures does reveal that whilst Germany’s economy continues to strengthen; other economies in the Eurozone are struggling.

Markit PMI data from France’s composite of manufacturing and services contracted for the second month in a row as well as falling to a seven month low. As a result, Markit’s chief economist Chris Williamson suggests that France’s GDP will fall by 0.1% in the current quarter – the second consecutive quarter that France’s economy will have contracted and thus fears of another recession in France.


The US dollar finished marginally lower against most of its counterparts following disappointing manufacturing figures. Markit revealed that manufacturing PMI failed to rise up to expectations and was actually lower than the previous month coming in at 54.4 in December.

Whilst the NY Empire State manufacturing index rose to 0.98 in December from -2.21 in November, the data also failed to live up to a rise to 4.5.

The silver lining from the releases in the US came after data revealed that US industrial production increased beyond an expected 0.5% to 1.1% in November.


In the release of the December minutes, the Reserve Bank of Australia maintained their stance that the currency remains too high as well as maintaining the option to keep monetary policy loose. Thus the central bank would be open to further interest rates cuts should they need to.


We could well be in for a volatile day today as inflation figures from the Eurozone, UK and the US are all in focus.

UK inflation is forecasted to remain at 2.2% in November. However there are some reports suggesting that the rate could fall to 2%, closer to the Bank of England’s target. This could well be detrimental for the pound as thoughts of a hike in interest rates would be put on the back burner.

Eurozone inflation is forecasted to increase to 0.9% in November from 0.7% in October. A rise in inflation should alleviate the ECB of needing to add to monetary stimulus, a practice that would weaken the euro.

And finally US inflation is forecasted to rise to 1.3% in November from 1% in October. One of the criteria for tapering monetary stimulus in the US is for inflation to be just below 2%. So a rise in inflation could cause US dollar strength.

Key Announcements:

9.30am – GBP – Consumer Price Index (Nov): Expected to remain at 2.2%.

10.00am – EUR – Consumer Price Index (Nov): Expected to rise to 0.9%.

10.00am – EUR – ZEW Economic Sentiment (Dec): Expected to increase to 60.9.

10.00am – EUR – German ZEW Economic Sentiment (Dec): Expected to increase to 55. 

13.30pm – USD – Consumer Price Index (Nov): Expected to increase to 1.3%. 

22.30pm – AUD – RBA’s Governor Glenn Stevens Speech.