Daily Market Report 18/08/15

GBP
Comments made yesterday were incredibly hawkish surrounding interest rate
hikes in the UK. The most notable coming from Bank of England member Kristin
Forbes, who said that a rate hike is needed ‘’well before’’ inflation reaches
2% and that the correct timing of such a move would be dependent on further
evidence prices are on course to reach the target.

Forbes also added that raising rates too early would dampen investment and

GBP
Comments made yesterday were incredibly hawkish surrounding interest rate
hikes in the UK. The most notable coming from Bank of England member Kristin
Forbes, who said that a rate hike is needed ‘’well before’’ inflation reaches
2% and that the correct timing of such a move would be dependent on further
evidence prices are on course to reach the target.

Forbes also added that raising rates too early would dampen investment and
demand, but also added that withholding a hike for too long could lessen the
effectiveness of the economic recovery. Departing Bank of England member Miles
also said that the case was building for a rise in Bank rate despite current
low inflation. Even though inflation is still low, it does appear that the Bank
of England are becoming more bullish with regards to their interest rate hikes.

EUR
In a day of relatively light economic calendars for all currencies, the only
notable piece of data was the Eurozone trade balance. The figure came in at a
surplus of €21.9b against a €21.3bn consensus, which was in fact the
highest reading seen in the last 6-months. This has mostly been down to the
recent weakness of the EUR, proving attractive for exporters  of EU
goods. The month-on-month figure showed a 1.4% increase in exports, and exports
from the single currency area to the rest of the world rose 12% to €182.7bn in
the year to June.

In other news, German Chancellor Angela Merkel said that there is clarity there
cannot be a Greek debt haircut but added there’s room for an extension of Greek
debt maturities. Angela Merkel and Wolfgang Schaeuble have urged German MPs to
back the Greek bailout ahead of a Bundestag vote on Wednesday. She also said
the International Monetary Fund (IMF) is likely to contribute money, in autumn,
to the €86 billion aid programme. The vote on Wednesday is essential a vote by
German government to accept the terms of the bailout proposal to be given to
Greece. Merkel’s grand coalition has 504 MPs in the 631-member parliament.
About 60 of them rebelled in an earlier vote on Greece in July, and with
rumours circulating that the rebels’ ranks could grow to more than 120 this
time around.

USD
The latest housing market index from the National Association of Home builders
came in at 61, matching expectations. The index remains at the highest level
since November 2005, and has registered above 60 for three straight months
cooling US property market concerns. On another note, manufacturing activity in
New York state plunged to its weakest level in August since 2009 due to steep
drops in new orders and shipments, although optimism on future business
improved U.S. manufacturers have been struggling with a variety of
headwinds, including weak overseas economies in Europe and China, that have cut
into exports. The dollar has also risen about 20% in value in the past year,
which can also reduce exports by making them more expensive. Cheaper oil,
meanwhile, has reduced demand for steel pipe and other drilling equipment.

Key Announcements:

09:30 – GBP: Consumer Price
Index (YoY) expected to remain unchanged at 0%.