Daily Market Report 27/03/2013

Sterling’s moves against its two major peers, the euro and US dollar, were very much muted yesterday as investors look towards today’s revised 4th quarter GDP figures for the UK.

The market anticipates the data to show a 0.3% contraction in growth, however recent better than expected services sector and retail sector figures could counter this and we could see an improved reading.

Cyprus still remains in the headlines an central bank governor Panicos Demetriades confirmed that capital controls will be imposed on every bank in Cyprus controlling the flows in and out of each bank, but claimed that the controls will be ‘loose’ and ‘temporary’.

Whilst the euro still continues to struggle, other risk based assets such as equity markets, the Canadian dollar, New Zealand dollar and Australian dollar seem to be flourishing following the bailout of Cyprus. It would seem that the bailout has enticed risk appetite, but as confidence seems to be lacking in the euro, flows into these other riskier assets have increased causing them to strengthen across the board.

The only notable data came from the US albeit a mixed set of figures. Durable goods orders rose to 5.7% in February from -3.8%, but consumer confidence for the month of March fell to 59.7, well below an expected 68. New home sales also fell in February to 411,000. The mixed set of results seemed to limit further strength in the US dollar yesterday

As noted above, the main focus will no doubt fall on 4th quarter GDP figures from the UK. A figure better than a 0.3% contraction, should support the pound and given the lack of confidence in the euro zone and the increased risk appetite amongst investors (therefore sapping demand for the US dollar), gains for the pound should not be ruled out today. Euro investors should also take note of consumer confidence and industrial confidence figures this morning. Given the recent events in Cyprus, we could well see a drop in consumer confidence for the euro zone.

Key Announcements:

9.30am – GBP – Gross Domestic Product (QoQ) (Q4): Expected to remain at -0.3%.

10.00am – EUR – Consumer Confidence (Mar): Expected to fall to -23.5.

10.00am – EUR – Industrial Confidence (Mar): Expected to fall to -12.

12.30pm – CAD – Consumer Price Index (YoY) (Feb): Expected to increase to 0.8%.

14.00pm – USD – Pending Home Sales: Previous figures were at 9.5%.