Daily Market Report 29/01/2013

The pound suffered another rout yesterday following comments made by Mark Carney, who will be the new Bank of England governor in July, that central banks around the world have more room to ease monetary policy further if needed.

With sterling already starting yesterday on the back foot following an industry report showing that UK house prices declined in January, Carney’s comments did nothing but to add to the negative sentiment surrounding the pound with sterling falling to a ten month low against a trade weighted basket of currencies. With little notable UK economic data due for release this week, the likelihood of a trend reversal for the pound does look more and more unlikely.

Support for the euro dwindled a little bit yesterday following data indicating that consumer confidence in Italy hit a 17 year low.

From the US there was a mixed bag of economic data. Orders for durable goods, such as cars and televisions, rose to 4.6%, exceeding expectations of only a 2% increase; whilst US house sales data came in showing a fall of 4.6% instead of a rise of 0.3%. More importantly, credit rating agency Fitch, have removed their warning of a near term US rating downgrade following the temporary suspension of the debt ceiling.

In other news India lowered interest rates for the first time since April to 7.75% from 8%, easing policy to aid growth as inflation cools and the government curbs the budget deficit.

Mixed news for the euro this morning as figures reveal that consumer confidence had increased more than expected in Germany, but retail figures from Spain showed a fall in sales, -10.7%, when compared to last year, -7.8%.

In the last Federal Open Market Committee meeting in December, the Federal Reserve stated that the program could come to an end by the end of 2013. However we could see some US dollar weakness on expectations that the Federal Reserve, when they meet tomorrow evening, could look to expand the asset purchasing program and may change their stance with quantitative easing possibly looking to continue for some time.

Key Announcements:

15.00pm – USD – US Consumer Confidence: Expected to decrease to 64.

23.50pm – JPY – Retail Trade: Expected to decrease to 0.3%