Daily Market Report - 25/11/2015

Bank of England governor Mark Carney said that the UK interest rates are likely to remain low "for some time". UK rates have been held at 0.5% since March 2009. Most economists are not expecting the Bank to raise rates until mid-2016 at the earliest.

Mr Carney said that "even with limited and gradual rate increases it still will be a relatively low interest rate environment". He remained vague on when a rate rise might be coming, and added: "The question in my mind is when the appropriate time for interests to increase and that is strongly consistent with the strength of the domestic economy." Mr Carney also said that he did not see any need for negative interest rates. Mr Carney also said productivity was more likely to exceed than undershoot the Bank's latest forecasts, reducing the pressure on inflation.

Meanwhile, sterling fell after the Bank's chief economist Andy Haldane said he saw more downside risks to growth and inflation than had been indicated by the Bank's latest economic outlook. He reiterated his view that the Bank's next move might actually be a rate cut. "I see the balance of risks around UK GDP growth and inflation as skewed materially to the downside, more so than embodied in the November 2015 Inflation Report," he told the Treasury Committee.

US economic growth for the third quarter has been revised up, helped by stronger investment and house building. GDP rose at an annual pace of 2.1%, not the 1.5% rate it reported last month. Even with the GDP revision, growth still slowed from an annual pace of 3.9% in the second quarter. However, in the second quarter of the year the economy was rebounding from the impact of the harsh winter weather experienced at the start of the year, which slowed the US economy to a crawl.

The better third quarter growth is still likely to fuel speculation that the US Federal Reserve is ready to raise interest rates next month. The upward revision by the Commerce Department puts the US economy on course to grow at least 2% in the second half. It comes in the wake of strong jobs growth in October. Consumer spending, which accounts for more than two-thirds of US economic activity, grew at a 3% rate, down from the 3.2% rate estimated last month.

German business confidence unexpectedly rose in a sign that Europe’s largest economy is robust enough to weather risks including a global slowdown and Volkswagen AG’s emissions scandal. The IFO institute’s business climate index climbed to 109 in November, the highest level since June 2014, from 108.2 in October. 

German companies are battling to cope with a slowing global economy, the home-grown scandal at its biggest carmaker, a refugee crisis, and now a threat to euro-area consumer confidence after the Paris attacks and lockdown of Brussels. Even so, record-low unemployment and interest rates are supporting domestic demand, and more stimulus may be ahead as the European Central Bank considers whether to ease monetary policy further.

Key Announcements
13:30 USD: Core Durable Goods Orders m/m Expected to rise to 0.5% from -0.3%       
13:30 - USD : Unemployment Claims expect to see a small rise to 273K from 271K last week