Daily Market Report 30/01/2013

The pound had some respite against the euro and US dollar, and strengthened in European trade yesterday following comments made by Bank of England policy maker David Miles that UK economic growth is likely to improve to between 2% and 2.5% within 18 months.

In what looks to be a short term correction, his comments seemed to be taken positively by the markets; inciting investors to book profits on sterling’s recent weakness. However, we will need to see an improvement in economic data to back this for David Miles’s forecasts to come true.

Despite Spanish retail sales falling from its previous years figures; the euro was buoyed yesterday following better than expected consumer confidence figures from Germany as well as increasing risk appetite on optimism that fiscal turmoil in the bloc is easing. The euro currently trades at a 14 month high against the US dollar.

The US dollar on the other hand weakened against most of its peers yesterday on speculation that the US Federal Reserve may signal a change to its asset purchasing program during the Monetary Policy meeting this evening. US consumer confidence also fell below expectations putting the dollar under further pressure.

Elsewhere we saw the Australian dollar and New Zealand dollar rise buoyed by risk appetite as well as business confidence in Australian rising by the most in more than a decade and New Zealand’s trade deficit narrowing.

Despite a plethora of economic data due for release today, the main focus for investors will no doubt be the US Federal Reserve’s Monetary Policy meeting. With speculation continuing to side for further monetary stimulus by the Fed, we may well see a continuation of US dollar weakness leading up to the announcement.

 Key Announcement:

 9.30am – GBP – UK Consumer Credit: Expected to increase to £0.2bln.

 9.30am – GBP – Mortgage Approvals: Expected to increase to 54.5k.

 10.00am – EUR – Consumer Confidence: Expected to increase to -23.9.

 13.15pm – USD – ADP Employment Change: Expected to decrease to 165k.

 13.30pm – USD – Core Personal Consumption Expenditures: Expected to decrease to 1%.

 19.15pm – USD – Fed Interest Rate Decision and Monetary Policy Statement and Press Conference.

 20.00pm – NZD – RBNZ Interest Rate Decision and Monetary Policy Statement.