Daily Market News 11 Mar 2011

 

Yesterday’s market movers

  • Germany trade balance which was expected to increase slightly came out worse than the expectation. Analysts think since the exports are the major support for German and EU economy at the moment, the news will only severe the EU exports environment and prove the interest rate rise would not be helpful under the circumstance.
  • ECB gave out monthly report mainly about the inflation outlook. In comparison to December, the central bank shows the inflation projections moved slightly upwards which could be the signal of interest rate hike. However, this reflects good prospects for the EU economy.
  • UK Industrial Production January MoM and YoY were released to be better than expected. This picked up the sterling from the loss overnight hitting 1.62 level. However, we had the following BoE interest rate decision which kept the 0.5% historical low since March, 2009. GBP therefore lost 0.3% against US dollar and lost 0.2% against Euro. BoE is going to release the minutes for the meeting on 23rd March. The main concern for raising the interest rate now is not only about the depression of the service sector but consumer spending as well. The country needs a real spending ability from the domestic economy to push a higher interest rate.
  • US Jobless claims and trade balance came out at the same time, both of which had a worse than expected figure. This resulted in a further risk aversion led by investment uncertainty of the global market. More and more hot money flew back to the dollar accounts and has been in holding.


Today’s market movers

  • German CPI is due to come out early morning with an increase according to the estimates. This will add up to the ECB’s high inflation talk yesterday so that may help them make the interest rate rise decision.
  • UK producer price index input and output February MoM and YoY are coming out. Consensus for MoM is negative and for YoY is positive which means the producers may suffering a higher price level in the same period last year. If it comes out higher, we might see a positive momentum for the sterling. However, because it could be an inflationary indication, anxiety about the whole economy outlook would not be very optimistic.
  • Finally, we have US retail sales and Reuters/Michigan consumer sentiment index to be released in the afternoon. Market prospects are positive for the data which will probably help to relieve the risk aversion.
  • US dollar will still be the main character for the end of the week. Mervyn King will speak in the evening. If he gives out a hawkish talk for UK economy, we might see a recovery for the sterling before market closes.