GBP

The
pound finished the day lower than many of its trading counterparts yesterday
following comments made by Bank of England policy marker Martin Weale that
inflation has fallen sharply and unexpectedly over the summer.

GBP

The
pound finished the day lower than many of its trading counterparts yesterday
following comments made by Bank of England policy marker Martin Weale that
inflation has fallen sharply and unexpectedly over the summer.

Given
that recent pound gains were influenced by the markets thinking that the BoE
may hike up interest rates sooner than the third quarter 2015 forecast; Weale’s
comments however dampened hopes of a rate hike as a higher rate of inflation is
required for the BoE to raise rates.

The
pound finished 0.7% lower against the both US dollar and euro respectively.

EUR

The
euro was well supported following encouraging signs that Germany’s rate of
inflation has increased form -0.2% to 0.2%. An improving inflation outlook does
dampen the possibility of any further monetary policy being introduced by the
ECB and as a result investors sought out the single bloc currency will not be a
attracting a negative rate of inflation.

Traders
seemed to shrug off the employment numbers from Greece yesterday which showed
that an additional 14,023 people were unemployed in September with the
unemployment rate increasing to 27.4%.

NZD

The
Reserve Bank of New Zealand kept interest rates at 2.5% last night but did
signal its intention to fight inflation by raising interest rates in first half
of 2014 as the economy improves.

New
Zealand could well be the first developed country to start raising interest
rates as accelerating economic growth and a housing boom could well stoke up
price pressures – a higher rate of interest would combat a higher rate of
inflation.

AUD

The
Australian dollar looks set to continue its longer term downtrend as the
unemployment rate is set to have increased to 5.8% in November from 5.7%,
although an additional 21,000 new jobs were added against an expectation of an additional
1,000.

Today

Data
from France showed that inflation improved marginally in France from -0.1% to
0.0%. But inflation in Italy remained at -0.3% instead of rising to 0.1%.

Industrial
production from the Eurozone has also missed expectations falling by 1.1%
instead of rising by 0.2%. As a result the euro has weakened against both the
US dollar and the pound in early morning trade

Mario
Draghi is also set to be doing a speech in front of European Union parliament
today also.

George Osborne,
UK chancellor, will be
appearing before the Treasury Committee of parliament from 10am to discuss last
week’s autumn statement.

Although
there is an expectation for the number of people filing for jobless claims to
increase by 23,000 this week, retails sales in the US is expected to increase
from 0.4% to 0.6%, which could well provoke US dollar strength.

Key Announcements:

13.30pm
– USD – Initial Jobless Claims (Dec 6): Expected to increase to 321,000.

13.30pm
– USD – Retail Sales (Nov): Expected to increase to 0.6%.