Daily Market Brief – 12 October 2015

Your Monday Market Brief

Quote of the day: “Far and away the best prize that life has to offer is the chance to work hard at work worth doing.”

October 12th: Highlights

  • Sterling under pressure
  • Euro hits three week highs against Dollar
  • AUD sees impressive gains
  • Investors eye Tuesday CPI, PPI and Retail Price data

Sterling Comment

Combined weakness in the Sterling, and strength in the Euro has put significant pressure on the GBP/EUR. This was partly caused by a statement from Mario Draghi, President of the ECB, saying that QE was working better than expected. Uncertainty about economic, and inflation data in the UK have stopped the Sterling to pare some of its losses. Friday saw the release of very underwhelming trade balance figures for August. GBP/EUR is currently trading in the region of 1.348.

The pound suffered a mild blow against the dollar on Friday as global stocks, and risk sentiment pushed higher on Friday. It has recovered slightly at the London open this morning. Important data releases are due to take place later in the week with UK inflation data, and US inflation data on Thursday. This will push volatility later in the week and keep trading subdued today, and tomorrow. GBP/USD is currently trading in the region of 1.535.

Economic data from the UK and Europe due to be published on Tuesday will likely lead to greater EUR/GBP volatility. Markets will be looking at British inflation figures. Any positive movement in the CPI figure will bolster the Sterling significantly. Although Mark Carney, Governor of the Bank of England, insisted that low inflation is only temporary, a drop below zero will make it infinitely harder for proponents of a rate hike to make a case.

Global Comment

Generally, public holidays in the US, Japan, and Canada, paired with an empty economics data calendar could mean subdued movements for the next couple of days. The dollar index, a measure of the USD against a basket of six major currencies, head into its second straight week of losses after a not so close vote FOMC meeting to keep rates on hold. General concern about the global economy has kept the dollar nursing its losses in the last week.

The Euro has been making headway against the greenback, and reached a three-week high on Friday. Expect more movement in this direction as inflation from the European QE programme picks up, and the continued lacklustre US economic performance since late August. Similarly, the Swiss Franc also hit a three-week high against the dollar.

The AUD has seen impressive growth this last week, reaching 7-week highs against the US Dollar on the back of an accomodative central bank policy from the RBA keeping its rates on hold at 2.00%. Gains in commodities prices, and supportive central bank policies contribute to strenghtening the Aussie.

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Paul Plewman
Director of Sales & Operations
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