Daily Market Report - 26/01/2015

The consumer price inflation dropped to the joint record low of 0.5% in December, driven down primarily by cheaper fuels and food, and is expected to fall below zero in early 2015.

Despite the expectations of slower sales in the run-up to Christmas, significantly low inflation in the UK is seen as still helping boost consumer appetite. Retail sales volumes soared above estimates between October and November and year-on-year sales posted the biggest rise since May 2004, as the new phenomenon of 'Black Friday' - the day following Thanksgiving Day in the United States - helped bolster sales in November.

Investors responded to Mario Draghi's plan to stoke the Euro zone economy by selling the euro, which pushed the pound to a seven-year high against the Euro. However, the action could prove a mixed blessing for the UK. The weakening euro raises the prospect of cheaper foreign holidays for Britons, but a tougher climate for the UK's exporters.

The Euro Zone economy began 2015 in better shape than expected but firms were forced to slash prices, a day after the European Central Bank announced a money-printing plan in a bid to revive inflation. Firms across the continent have been cutting prices at the fastest rate in nearly five years this month, in a trend that backs up the ECB's decision on Thursday to embark on a programme of quantitative easing.

Eurozone Composite Flash Purchasing Managers' Index showed good growth as it bounced to a five-month high of 52.2 from December's 51.4 which marked its 19th month above the 50 level that separates growth from contraction.

Over the weekend it was confirmed that radical far left political party Syriza have won the Greek general election. The party strongly oppose  the austerity forced upon their nation by the EU to ensure they repay their crippling debt. This weakened off the Euro significantly in Asian trading as this sparked fears that the new Greek government will threaten to default on their debts and destabilise the Euro.

Key Announcements:
EUR - 09:00 - German IFO Business Climate  (Jan) expected to be higher at 106.3 from 105.5
GBP - 09:30 - BBA Mortgage approvals (Dec) expected to be lower at 33.6K from 33.7K

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