Daily Market Report - 26/03/2015

The latest survey from the IFO Institute suggests German companies are more optimistic and it’s economy is continuing to expand at a fair rate. The IFO’S business climate index was previously at 106.8 in February. This month it has risen to 107.9, beating forecasts. Economists expected a reading of 107.3. Companies are happier about current conditions and are more hopeful about future prospects. The weaker Euro and lower oil prices are giving German Companies a lift. Exporters are more confident about the future due to the slide in the exchange rate.

The US Dollar has lost some if it’s strength in the currency market due to Durable Goods Data being weaker than expected. When companies are buying durable goods their outlook is generally a lot more positive. The report was the latest data to suggest economic growth slowed down early in the year and gave investors greater excuse to sell dollars after a long rally in the dollar.

Some analysts have stated that the USD is overbought and now to expensive. Orders for US Durable Goods such as long-lasting consumer products and machinery fell by 1.4% in February. This is now extending the worst run since the depths of the financial crises. We have seen 6 consecutive months of flat and negative growth. It is the worst run for Core Durable Goods since the second half of February 2009.

Bank of England policymaker Kristin Forbes has reported that UK inflation will probably keep on falling now it has hit zero. The Bank of England could cut interest rates if it falls too far. With interest rates being low people will now start to have more money in their pockets which will lead to more spending. Bank of England’s Forbes has said that there’s a good chance inflation will fall again next month and be negative. Despite this it isn’t predicted to last too long.

Sterling strength is likely to cause import prices to fall even further. For example with the GBP being strong against the EUR the cost of goods is cheaper. Wages are now starting to pick up which should help to counteract the low inflation.

Mortgage approvals have hit their highest level in almost 5 months. 37,305 new home loans were agreed last month, up from 36,517 in January. The rise is a lot bigger than expected. Although activity did pick up last month it’s still 20% fewer new mortgages than in February 2014 when over 46,000 were approved.

Key Announcements
GBP: 9:30   -UK  Retail Sales (Year on Year) (Feb)  expected to fall to 4.7% from 5.4%
USD :12:30  -US Core Durable goods Orders (Feb)  expected to rise to 0.3% from 0%  
USD: 12:30 -US Initial Jobless Claims (March 20) expected to rise to 290K from 291K

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