Daily Market Report 30/10/2013

GBP

Sterling fell against all but two of its major trading partners yesterday, notably hitting a two month low against the euro.

Data showed that lending to businesses in September was down 3.2% from the same month a year earlier, dampening the recent optimism surrounding the UK economy.

On a more positive note, mortgage approvals were up from 66,000 to 66,735 highest levels since February 2008. This is on the back of the help to buy scheme and the easier access of mortgages. 

However given that the UK recovery was being driven by the housing sector, concerns are already arising about a possible property bubble, which as we have seen before could be detrimental for future growth.

USD

Data from the US yesterday showed that retail sales fell to -0.1% in September versus an expected 0.1% growth.

There was also a consumer confidence report out that was down to 71 from 75. This is not really surprising considering the shutdown has just ended and confidence in the economy is weak.

The data reiterated market thoughts that the Fed won’t taper quantitative easing anytime soon. This resulted in the Dow Jones closing at record highs.

Euro

Data from the euro zone this morning has shown that Spain’s economy has grown for the first time since 2011. Third quarter growth of 0.1% was boosted by exports and a busy tourist season as holidaymakers stayed from the trouble regions in the Middle East and North Africa.

In Germany the number of unemployed people has increased to 2.2mln since last September – an increase of 28,000 people.

Today

The main focus will be on the Federal Reserve Monetary Policy Statement this evening. Expectations are for the Fed to maintain the current US$85bln bond buying programme as well as having a dovish (negative) outlook considering the recent government shutdown. However, it’s worth noting, if the Fed show no clear dovish tone with regards to the economy then we could well see the US dollar strengthen.

Key Announcements:

10.00am – EUR – Consumer Confidence (Oct): Expected to improve to -14.5.

10.00am – EUR – Economic Sentiment Index (Oct): Expected to improve to 97.4.

12.15pm – USD – ADP Employment change (Oct): An additional 150,000 jobs are expected to have been added.

12.30pm – USD – Consumer Price Index (Sep): Expected to have fallen to 1.2%. 

13.00pm – EUR – German Consumer Price Index (Oct): Expected to remain at 1.4%.

18.00pm – USD – Fed’s Monetary Policy Statement and Rate Decision.

20.00pm – NZD – RBNZ Interest Rate Decision: Expected to remain at 2.5%.