Daily Market Report - 27/01/2016

GBP

In a speech by Bank of England governor Mark Carney to the treasury committee, he focused on global risks that could rattle momentum and restrain inflation, prompting many economists to forecast no change in interest rates for at least another year. Carneys’ downbeat commentary on falling oil prices and China’s slowdown as well as Britain’s referendum on EU membership suggests that the BoE will not be raising rates any time soon. Data due to be released later this week is expected to show the UK economy accelerated 0.5% in the fourth quarter of 2015, however strength in domestic demand is dampened by weak manufacturing and exports. Sterling lost ground against its rivals following the statements from Carney.
 
According to news reports, Prime Minister David Cameron and German Chancellor Angela Merkel have made progress in Britain’s renegotiation with the EU. The UK is to hold an in-out referendum on EU membership by the end of 2017 with the Prime Minister pledging to secure a better deal for the UK, and although there is still a long way to go in the negotiations there is a strong possibility that a deal is possible.

USD

Consumer confidence rose to a three month high in January to 98.1 from a revised 96.3 in December. Measures of consumers’ outlook on current conditions were unchanged, while their view on future conditions improved. The Conference Board’s Lynne Franco said “For now, consumers do not foresee the volatility in financial markets as having a negative impact on the economy”. Consumer outlook for the labour market improved this month, 13.2% of those surveyed anticipating more jobs, however the proportion expecting a reduction in income also climbed.
 

Key Announcements

15:00 – USD – New Home Sales – expected to increase from 490K to 503K

19:00 – USD – Federal Funds Rate – expected to remain unchanged at 0.5%
 
19:00 – USD – FOMC Statement