Market News & Insights
5 November 2013

Markets Continue to Watch as We Await Bigger Data Releases

EUR/USD 1.3485
GBP/USD 1.5977
GBP/EUR 1.1847 (0.8440)
EUR/CHF 1.2301
GBP/CHF 1.4574
GBP/AUD 1.6860

Yesterday saw US Factory Orders for both August and September, and while both releases missed their expected figures, September orders rose 1.7% on the back of a two month decline. However a slight concern in September’s results is the 1.3% drop in the so called core capital goods, which include machinery and electronics, these capital goods are usually good indicator of business investment plans. today’s ISM non-manufacturing composite release will give us a better indicator of economic health and market conditions, the 54.2 expected figure will be one to watch today.

Recently some Fed members have come out in support of tapering beginning as soon as possible. However yesterday we saw more mixed messages on the topic when Eric Rosengren emphasizes the need for continued accommodative monetary policy. He illustrated the need for a full recovery in the unemployment rate and for inflation to close in on the two percent goal. We will continue to watch the data for leads, should US economic releases remain weak then we’ll maintain expectation for a Q1 2014 Taper, however if the shutdown and debt ceiling concerns did not impact the economy as bad as expected we may well see a possible surprise December taper.

To the UK and today sees services PMI at released at 9.30 am. The UK is expected to continue its strong economic growth according to analysts in the city with 60.0 expected. We have already seen good figures for PMI this year. Last month’s reading was 60.3 which is well above the neutral 50.0 mark, should we see a figure near the expected 60.0 mark, it would send a strong message to the market that the positive momentum in Britain’s economy will continue for the foreseeable future.

Yesterday saw the Pound rise .03 percent against the greenback to 1.5959 and Sterling was at .8456 pence per euro. This was on the back of a report published that indicated that U.K construction activity rose to the fastest pace in six years. The UK economy has continued to grow faster than expected as a pick up in house price stokes consumer spending, according to the national institute of Economic and Social Research.

Today sees EU Economic Forecasts report due out at 11:00 am, this report includes economic forecasts for EU member states over the next two years. Last week’s news that the Eurozone’s annual inflation rate sharply declined to .07 percent in October raises the stakes for this Thursday’s announcement from the ECB. It appears that there is new disinflationary pressure on the EU; it is no real surprise that there are calls to the ECB to lower interest rates. There are several ways that the ECB can combat this. Mario Draghi has stated that they are willing to use any instrument necessary to maintain the short term Money market rates which is warranted by their assessment of inflation in the medium term.