Daily Market Report - 20/01/2016

GBP

Yesterday we had the monthly inflation figure form the UK that came in better than expected at 0.2% versus an expected 0.1%. However, sterling continues to be put under pressure as Mark Carney spoke a few hours later and said that ‘now is not yet the time to raise interest rates.’ This is because of a ‘renewed collapse in oil prices, the volatility in China, and the moderation in growth and wages here at home since the summer’. Hence, for Carney, there is ‘not enough cumulative progress … to warrant tightening monetary policy.’ Consequently, sterling lost considerable ground against dollar and euro.

EUR

Germany released its ‘ZEW Economic Sentiment that came out at 10.2 against an expected 8.2. This is a gauge of the sentiment of investors and analysts for the next 6 months on the outlook of the German economy and is a good indication of economic health and future economic activity.Euro’s ability to stand its ground against dollar given such divergent monetary policies will be interesting to watch this week as the ECB have a two day meeting starting today and culminating on Thursday in a press conference which should see some volatility.

Lastly, the IMF has cut its world growth forecast for the next two years by 0.2% and warning that the recovery from the financial crisis could be derailed if key challenges are mishandled.

Key Announcements

GBP - 09:30 :UK Unemployment Rate expected to be unchanged at 5.2%
USD- 13:30: US Consumer Price Index (Dec) expected to fall to 0.5% from 0.8%