Market News & Insights
11 December 2014

McCafferty Looking to Ruffle Some Feathers

EUR/USD 1.2421
GBP/USD 1.5656
GBP/EUR 1.2658 (0.7933)
EUR/CHF 1.2015
GBP/CHF 1.5146
GBP/AUD 1.8947

The UK saw its trade deficit, the value of exports minus the value of imports, narrow to £2bn in October from £2.8bn in September, and as a result reach seven month lows. The main contributor for the fall in imports was mainly driven by lower oil imports. Lower oil prices couldn’t have come at a more timely moment as the weak Eurozone looks to be dragging on UK exports. This coupled with the fact that we have seen a 12% strengthening in the value of GBP/EUR from the lows seen last year.

Britain has been very much relying on domestic demand to propel its economic recovery and with the recent drop in fuel prices the BoE will be hoping this see consumers spend their pound elsewhere. This will of course help the pound on its recovery and with many analyst predicting a slight pickup in the Eurozone in 2015, along with fading geopolitical tensions, there is potential room there for the UK to excel in the new year.
While we have no economic data of note today, we currently have Ian McCafferty on the wires. Mr McCafferty has been one of the supports of an interest rate hike and only yesterday reaffirmed his support for a 0.25% point rise stating that raising interest rates now will help to “support and sustain” Britain’s recovery. We’ll have to wait for next week’s BoE minutes to see if he managed to ruffle any of the feathers of the other 7 doves with two hawkes already pushing for increase in rates.

To the Eurozone and we have already seen data out from Germany this morning, where consumer prices were up 0.6% YoY in November, down from the 0.8% pace that prevailed in the previous four months. While the monthly inflation figure remained unchanged at 0.0%, both these figures were in line with expectation. This 0.6% reading however is still double the pace for the entire Eurozone. A 0.3% figure for the Eurozone also has the potential to fall further as ECB’s Praet expressed concerns that falling oil prices may push inflation below zero.

Later on this morning we will get more clarity on the Eurozone’s current condition when the ECB release its monthly bulletin, here we will be provided with a detailed analysis of current and future economic conditions from the bank’s viewpoint.

In the US we have more data of note out today with advance retail sales and weekly initial jobless claims headlining. Consumer spending in the US hasn’t looked all that convincing the last couple of months. We saw September’s consumption figure slide 0.3%, and more recently we had reports out from the US that Black Friday’s sales were 11% this year. However not to sound like a broken record but with lower oil prices, growing employment numbers along with steady growth in income, consumer confidence should be flying high and we expect a 0.4% gain in today’s retail sales figure.