Daily Market Report 24/01/2013

There was a major development last night, with the US House of Representatives approving a temporary suspension of the Federal debt ceiling until May 19th.

The move should ease tensions and give the two parties more time to agree a more long-term plan. The news was received positively in the markets inciting risk appetite for higher yielding assets and thus causing the US dollar to fall.

Other developments from the US last night saw Federal Reserve Chairman Ben Bernanke announce that he and his fellow policy makers will more than likely press ahead for further bond purchases when they meet next week in order to bring down the US unemployment rate.

David Cameron’s EU speech did little to move the markets; but we did see some support for the pound as the UK unemployment rate dropped to 7.7% in the three months leading up to November. The Bank of England minutes showed that all nine monetary policy committee members voted to keep interest rates the same. However MPC member David Miles was the lone dissenter regarding the asset purchasing program (QE), voting to increase bond purchases by £25 billion.

Late afternoon we saw the Canadian dollar fall against the pound in dramatic fashion. The Bank of Canada decided the keep the benchmark interest rate at 1% but more importantly commented that while an in increase in the base rate will be needed over time; the increase will not be happening soon.

The biggest move of the day saw the South African rand fall over 2% against the pound during European trade. Inflation rose to 5.7% in December, adding to concerns that growth is slowing amid labour protests and civil unrest.

Manufacturing figures released from Germany and the euro zone this morning have come in higher than expected giving support for the euro in early morning trade.

Thoughts for the day…

With little macroeconomic data to be of influence, the expectations are that sterling will trade range bound today with investors looking to take cues from tomorrows UK GDP figures before taking positions.

Key Announcements:

9.30am – UK – BBA Mortgage Approvals: Last year’s figures were 33.6k.

13.58pm – USD – Markit Manufacturing PMI (Jan): Expected to decrease to 53.

23.30pm – JPY – National Consumer Price Index (YoY): Expected to remain at -0.2%