Daily Market Report 31/10/2013

GBP

Mixed data from the UK this morning. Firstly, GfK consumer confidence fell for the first time in six months in October – erasing some of the optimism that we have seen over the last six months for the UK. Data from Nationwide showed that house prices have risen at the fastest annual pace in more than three years, rising by 5.8% in October.

The data continues to provide ammunition to those of the opinion that the UK could well be under risk of another housing bubble – which could well be detrimental for future UK growth.

USD

Data from the US yesterday backed up recent speculation that the Fed may not be ready to taper their quantitative easing plan until March next year.

ADP payroll data showed that only 130,000 jobs were added in October falling shy of an expected 150,000 to have been added. The data was hardly surprising though given the government shutdown and this obviously has caused concerns about the health of the economy.

US inflation fell to 1.7%, missing an expected 1.8%. The rate remains below the Fed’s target of 2%, a criteria for tapering QE.

Unsurprisingly, the Fed maintained QE at monthly bond purchases of US$85bln, being accommodative depending on economic data. However judging by movements in the markets following the announcement, the US dollar strengthened, the Fed’s comments seem to have been judged less negative than markets were expecting.

JPY

The Bank of Japan also left its monetary policy unchanged but did adjust some of their economic projections. Inflation is forecasted at 1.9% by end of 2015 and growth has been revised higher to 1.5% for end of year 2015. The yen as a result appreciated.

NZD

The Reserve Bank of New Zealand held interest rates at 2.5% last night with any potential hike in the cash rate depending on the strength of the housing market. The comments were deemed upbeat causing the New Zealand dollar to rise by 0.6 cents against the pound.

Euro

S&P Dow Jones Indices have downgraded Greece from developed market to emerging market status as their growth lags behind those nations of similar characteristics.

Data from Germany has disappointed with consumer confidence falling shy of expectations for October, along with retail sales falling shy of expectations, only rising by 0.2% in September. As a result we have seen the euro drop off to the tune of 0.2 cents against the pound in early morning trade.

Today

Inflation in the euro zone is expected to be stagnant at 1.1% in October, backing the ECB’s stance on maintaining interest rates at 0.5% for a prolonged time. Focus will also be on the unemployment situation in the euro zone, with expectations that the unemployment rate will be maintained at 12%.

The US employment situation will also be in focus this afternoon.

Key Announcements:

10.00am – EUR – Consumer Price Index (Oct): Expected to remain at 1.1%.

10.00am – EUR – Unemployment Rate (Sep): Expected to remain at 12%.

12.30pm – USD – Initial Jobless Claims (Oct 25): Expected to fall by 10,000 to 340,000.

13.45pm – USD – Chicago PMI (Oct): Expected to fall to 55.