Daily Market Report 26/03/2014


In the US the S&P/Case-Schiller index of US single family home prices rose 0.8% on a seasonally adjusted month on month basis, compared to forecasts of a 0.7% increase. Prices are now 13.2% higher than a year ago, down from a peak of 13.7% year on year back in November.

The US also reported strong consumer confidence yesterday. Confidence hit a six-year high in March, the latest sign that the economy is regaining momentum after a period of dismal weather. The index of consumer attitudes rose to 82.3, the highest since January 2008, from 78.3 in February.


Inflation in Britain has hit a new four-year low in February – 1.7% – dipping further below the Bank of England's 2% target and easing the squeeze on household incomes. The gap between inflation and average wage growth is now the smallest since April 2010.  Transport costs made the biggest downward contribution to the inflation rate, driven by falling petrol and other fuel prices. The falling cost of food as well as for clothes and shoes also eased price pressures. Given all of these goods are imported it is safe to say the strong pound has played a role in falling prices.

In the UK yesterday Figures from the British Bankers' Association showed this morning that banks approved fewer mortgages in February than in January while the total amount of lending to buy homes rose to its highest level in nearly two years. Mortgages for homes purchases slipped back to 47,550 last month, down from 49,341 in January which was the highest level since 2007. The Office of National Statistics also reported house prices were up 0.6% month-on-month and 6.8% year-on-year in January.


Speaking in Paris yesterday, ECB President, Mario Draghi said the central bank was ready to act if inflation slipped lower than it expected. The ECB expects inflation to be up to 1% this year, 1.3% in 2015 and 1.5% in 2016. Draghi stated that if downside risks to this scenario appear, the ECB stand ready to take additional monetary policy measures to ensure the ECB maintains its target inflation rates – Ensuring they will do what is needed to maintain price stability. The euro broadly weakened off the back of the news and all things remaining equal further weakness for the euro could be on the cards.


The US will come into focus this afternoon with durable goods order set to have increased from -1% to 1% for the month of February and service sector output set to have expanded further to 54.2. We could well see US dollar strength off the back of the news.

Key Announcements:

12.30pm – USD – Durable Goods Orders (Feb): Expected to increase to 1%.

13.45pm – USD – Markit Services PMI (Mar): Set to increase to 54.2.