Daily Market Report - 18/12/2014

Yesterday the unemployment rate in the UK was unchanged at 6.0% in the three months to October which fell short of expectations with the original consensus of a fall to 5.9%. With this said, the unemployment total fell by another 63,000 during the quarter, to 1.958m.  On a positive note, we had the average earnings which went up by 1.4% in the quarter (or 1.6% excluding bonuses). This shows average earnings came in higher than CPI inflation, suggesting wages have slightly risen in real terms and workers are a little better off.

Also in the UK, The Bank of England’s monetary policy committee was once again divided by a 7-2 decision over interest rates this month. The December Minutes meeting also expressed that the seven doves were unwilling to increase borrowing costs until wages start increasing efficiently.

The continued deterioration in the economic situation in Russia is weighing on global investor sentiment. There has been a flight to the safe haven of USD as fears increase that a weak Russian economy will destabilise economic growth. 

In the US, inflation fell this month as the weak oil price cuts the cost of gasoline. Consumer prices declined by 0.3% in November with the original expectation being 0.1%. This was the biggest fall since December 2008 during a time when the financial crisis was at full roar.  This brings down the annual US inflation rate to 1.3%.

Janet Yellen raised a few points from her statement yesterday also. She removed the term "considerable time" from the Federal Reserve’s policy statement, and said it will be patient in how long it waits to raise interest rates. 

Additionally, she noted that economic activity is growing at a moderate pace, labour market conditions improved. 
The Fed also continued to stress the data dependency of its future policy decisions, saying that if data is better than anticipated, then rates will increase faster, while poor economic data would keep rates lower than expected.

Key Announcements:
GBP – 09:30: Retail sales figures (Nov) expected to rise from 4.3% to 4.4% 
USD – 13:30: US inflation ( Nov) expected to be lower at -0.1% 
USD – 13:30: Initial Jobless claims expected to rise from 295,000 to 294,000

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