Daily Market Report - 20/11/2015

UK Retail Sales, including and excluding fuel, came out weaker than expected yesterday, which saw the pound lose some of its previous day’s gains in mid-morning trade. The UK CBI Industrial Trends Survey was better than last month (-11 vs October’s -18), but the negative reading conveys negative sentiment in absolute terms. The Pound had a choppy day against both the USD and EUR but ended flat against the US Dollar and a touch weaker against the Euro. 

US data was, on balance, positive yesterday, lending further support to a Fed rate hike at the 15-16th December meeting. Whilst continuing jobless claims came out slightly worse than October’s print (2.175m vs October’s 2.174m), initial jobless claims were better than October’s print (271k vs 276k), the Conference Board Leading Indicator were better than expected (0.6% vs an expectation of 0.4%) and the Philadelphia Fed Manufacturing Survey were also better than expected (1.9 vs expectation of 0.5).

Furthermore, the FOMC minutes, released late afternoon on Wednesday, made firm reference to a December “lift-off” for rates and, as a consequence, the futures market, as indicated by Federal Funds Futures Contracts, now place a 72% chance of the Fed raising rates next month.

The European Central Bank's chief economist yesterday warned of the perils of inaction to avert a slide in prices, as records of the bank's latest policy meeting, released yesterday, suggested new ECB action within weeks. Peter Praet, chief economist and one of the most influential voices at the European Central Bank, conveyed his fear in a public address yesterday that consumers and investors could lose faith in the ECB's ability to keep prices on track if inflation slowed further.

Keeping price inflation close to 2% is the ECB's main mandate, and Praet's warning that the ECB will lose credibility, by failing to meet this mandate, signals a heightened readiness to act at the ECB’s 3rd December meeting. His warning echoed a similar message from other ECB policy makers. It reflects the central bank's biggest fear, that as prices drop, companies will delay investment and consumers will delay spending, choking the economy.

Key Announcements
08:00 – EUR: ECB President Draghi Speech 
09:30 – GBP :UK Public Sector Net Borrowing Requirement for September 
14:00 – USD : Federal Reserve’s Bullard speech
15:00 – EUR : Euro Area Consumer Confidence Index for November expected to improve to -7.5