Daily Market Report - 24/02/2016

GBP

The fragile pound lost nearly 1% against the USD yesterday with further uncertainty over Britons EU membership. Furthermore, the UK Inflation Report released yesterday made clear that the Bank of England could cut interest rates to zero if the UK was put in a “position where the economy needed additional stimulus”. However, in Carney’s words, there was “no intention and no interest” towards setting negative interest rates such as the likes of Japan and Switzerland to boost growth and inflation. This is because of the damaging effects that negative interest rates would bring to building societies. Overall, the wording and tone of the report indicates that Carney will and can, if necessary, drop interest rates to zero and offer additional asset purchases.

USD

The Conference Board Consumer Confidence Index came out at 92.2 against a forecast 97.4 showing how households deeming economic conditions as worse off since January. Lynn Franco, Director of Economic Indicators at The Conference Board, argues that “consumers [were] expressing greater apprehension about business conditions, their personal financial situation, and to a lesser degree, labor market prospects.” In addition, Existing Homes Sales – which is the number of residential buildings that were sold in January – came out slightly better than expected at 5.47 million against a forecasted 5.37 million.

EUR

In Germany, the Ifo Business Climate came out 1.3 worse than expected at 105.7. Germany’s business confidence has fallen for a third consecutive month signaling that companies in Europe’s largest economy are growing more concerned by volatile markets and China’s cooling economy.

Key Announcements

15:00 – USD: US New Home Sales expected to drop to 520K from 540K
15:00 – USD: Markit Services PMI ( Feb) expected to rise to 53.5 from 53.2