Daily Insight

The Dollar found some tentative support against the Euro yesterday, firming a surprising 0.4% by the close last night after falling to a new 20-month low earlier in the session. There was a host of significant economic data released in the States yesterday as a report on U.S GDP showed that the economy expanded at a revised 2.2% year-on-year in the three months through to September. Although U.S growth is still under the 2.6% seen in the second quarter, the revised estimate in the third was significantly higher than the 1.8% forecast in October and supports the Fed's view that the U.S economy will continue to expand at a moderate rate. Elsewhere, the Dollar came under increased pressure against the Pound, falling to the lowest level since September 1992 overnight to trade above the resistance level around 1.9548.

A separate report on the U.S housing market showed that the sales of new homes fell by more than expected in October, which will only fuel speculation that the housing slump is still gathering momentum. Even the chairman of the Federal Reserve, Ben Bernanke, couldn't halt the Dollar's rapid decline against Sterling as the market ignored his comments over the prospect of higher interest rates as he stated in New York that U.S inflation still remained at an "uncomfortably high" level. In terms of economic data, the Dollar may come under further pressure this afternoon with the release of the Fed's preferred measure of U.S inflation as the report on personal income and expenditure is widely expected to remain unchanged in October, while the Core PCE Deflator may fall from 0.2% to 0.1%.

The Euro continued to slide against the Pound yesterday amid a distinct lack of economic data released in the Euro-zone. The single currency failed to make any gains despite comments from ECB policy makers including the chairman Jean-Claude Trichet, who seem unconcerned with the Euro's recent strength and the potentially damaging effect on European exports. There is a host of economic data released this morning as German unemployment fell in November and it seems likely that Europe's largest economy will be able to supplement the introduction of the 3 percentage point tax increase at the start of next year. The Euro may make further gains against the Dollar this morning following the release of the revised estimate for European economic growth in the third quarter, which is widely expected to remain unchanged at 2.6% despite a series of rate hikes this year. Elsewhere, the Flash estimate of consumer price inflation may show an increase from 1.6% to 1.8% in November, which suggests that the ECB will need to continue raising interest rates.

Data Released 30th November

UK 10:30 Consumer Confidence (November)
UK 11:00 CBI Distributive Trades Balance (November)

EU 10:00 Flash Consumer Price Inflation (November)
EU 10:00 GDP (Q3 Revised)
EU 10:00 EC Sentiment Index (November)
- Industrial / Consumer Confidence

U.S 13:30 Initial Jobless Claims (w/e 25th November)
U.S 13:30 Personal Income / Expenditure (October)
- Core PCE Deflator
U.S 15:00 Chicago PMI (November)

written by Adam Solomon

The positive sentiment surrounding the Euro continued yesterday as the single currency rose to a fresh 20-month high against the Dollar despite comments from the French Finance Ministry expressing concerns that the recent strength of the Euro could hamper economic growth. The single currency found support from the M3 data, which showed that money supply into the Euro-zone grew at an annual rate of 8.5% in October, well above the ECB's 4.5% target. The 3-month moving average is the Central Bank's preferred measure of Euro-zone inflation and with money supply increasing at such an alarming rate, it seems likely that the ECB will continue raising interest rates next month and beyond into 2007.

The Pound continued to make gains against the majors yesterday, firming to a fresh two-year high against the Dollar and overnight we have tested the major resistance level just under 1.9550 and if broken, we will be trading at the highest level in 14-years. In addition, Sterling made unexpected gains against the Euro, rising 0.4% on the session following comments from the Chancellor of the Exchequer, Gordon Brown, who reiterated that economic growth would exceed forecasts this year. Elsewhere, a separate report on the UK housing market showed that house prices had increased at the fastest annual rate in 17-months in October despite the Bank of England's decision to lift UK interest rates to 5.0% this year. The focus this morning in terms of economic data will be the release of UK mortgage approvals for the month of October and although the data is expected to show a modest drop from the previous month, the figure will not be indicative of growth in the housing sector.

The Dollar continued to struggle yesterday following a report on U.S durable goods, which showed that orders had declined in October by the most in over six-years as companies become cautious over spending in the face of slowing economic growth. Orders fell 8.3% following a rise of 8.7% in September and a decrease in corporate investment could potentially hamper economic growth going into 2007. In addition, the Dollar came under further pressure as a separate report showed that U.S consumer confidence unexpectedly declined in November despite the sustained drop in fuel prices since mid-July. The index of consumer sentiment dropped to a reading of 102.9 from a revised 105.1 in October and it seems consumer spending will be insufficient in propelling economic expansion following the slowest growth in 3-years. There is some hugely significant data released in the States this afternoon as the revised estimate for U.S Gross Domestic Product is widely expected to remain unchanged at 1.8% in the third quarter.

Data Released 29th November

UK 09:30 BoE Mortgage Approvals (October)
UK 09:30 Consumer Credit (October)

U.S 13:30 GDP / Deflator (Revised Q3)
U.S 15:00 New Home Sales (October)
U.S 19:00 Fed Beige Book

written by Adam Solomon

The Pound rose for the eighth day in succession against the Dollar yesterday despite a distinct lack of economic data released in Europe or the States and that trend looks set to continue this morning as Sterling advances to fresh two-year high at 1.9440 following a particularly hawkish rhetoric from the Chancellor of the Exchequer. During a parliamentary debate in the House of Commons, Gordon Brown reiterated that UK economic growth will exceed the government's initial forecast this year to accelerate towards 2.5% by March 2007. The sustained growth in the UK economy will only fuel speculation that the Bank of England will have the scope to continue raising interest rates next year with the market currently pricing in a possible rise in February.

The Euro held firm against the majors yesterday despite concerns from several Euro-zone finance ministers regarding the recent strength of the single currency. Thierry Breton, the French Finance Minister, reiterated that it was important to be "highly vigilant" on the Dollar's recent decline while others urged the ECB to monitor the pace of economic growth as rigidly as they consider inflation. The Euro received a boost this morning as German consumer confidence rose to a five-year high this month as the impending value-added tax increase encouraged consumers to carry on spending before its introduction next year. There is some significant economic data released this morning as the ECB continues to monitor the M3 money supply into the Euro-zone and the consensus forecast is for a rise from 8.5% to 8.9% in the figures for October.

The Dollar continued to tumble against the majors yesterday, falling to a fresh two-year low against the Pound and a further 20-month low versus the Euro as the hangover from the Thanksgiving Holiday continued to weigh on Dollar sentiment. There is a mass of economic data released in the States this afternoon with the focus falling on existing home sales for the month of October and the report is expected to show further drop in the U.S housing market. Sales of previously owned homes may decline for the seventh month in succession last month as higher interest rates continues to weigh on demand. Elsewhere, the Dollar may come under further pressure as orders for durable goods is expected to drop by 4.0% last month while U.S consumer confidence may increase following the sustained drop in fuel prices over the same period.

Data Released 28th November

EU 09:00 M3 / 3 Month Moving Average (October)
EU 10:00 OECD Presents Economic Outlook

U.S 13:30 Durable Goods Orders (October)
U.S 15:00 Existing Home Sales (October)
U.S 15:00 Consumer Confidence (November)

written by Adam Solomon

Following on from last week, the Pound continued to make gains against the beleaguered Dollar after trading at the highest point in two years above 1.9300 following a slightly better than expected report on UK GDP in the third quarter. Economic growth expanded 0.7% in the revised estimate, which was largely in line with previous figures and the report will only fuel speculation that the UK economy will be able to sustain a further rise in UK interest rates. The focus this week in terms of economic data will be UK mortgage approvals for the month of October and the consensus forecast is for a marginal drop from September, although this is not indicative of any downward momentum in the UK house market.

The Euro also made significant gains against the Dollar last week, climbing to the highest level since March 2005 and remained firm against Sterling despite a host of negative economic reports from Germany. Although hawkish comments from several ECB officials have helped encourage the possibility of a further rise in Euro-zone interest rates in 2007. The single currency may also receive a further boost this week with a host of economic reports expected to show faster inflation, swelling money supply and a rebound in business confidence, which will only fuel speculation that interest rates in Europe will rise faster than in the States.

The Dollar came under intense pressure against the majors last week following a particularly damaging report from the Council of Economic Advisors, which showed a dramatic cut in U.S growth forecasts this year as the sustained decline of the housing market continues to weigh heavily on economic expansion. As a result of the downward revisions, the Dollar declined as speculation intensifies that the Federal Reserve will begin cutting U.S interest rates next year in the face of slowing growth and moderating inflationary pressures. In addition, a worse-than-expected report on initial jobless claims has gave way to speculation that the U.S unemployment rate is set to jump to 4.6% in the monthly job report released next week. There is a plethora of significant economic data released this week as trading gets back to normal following the Thanksgiving holiday with the focus falling on U.S consumer confidence, the core PCE deflator and the ISM index for manufacturing.

Data Released 27th November

EU Euro-zone Finance Ministers Meeting

written by Adam Solomon

The Dollar declined heavily against the majors yesterday, falling 0.8% versus the Pound as we approach the yearly high towards 1.9175 and a further 0.7% against the Euro to trade near a six month low. The Dollar sell-off can be attributed to a number of reasons, not least the rumours that investors were considering unwinding U.S carry trades in the build-up to the Thanksgiving holiday. In addition, a surprisingly negative report from the Council of Economic Advisors showed a dramatic cut in U.S growth forecasts this year with the CEA blaming the housing slump for its revisions. As a result, the Dollar came under increased pressure against the majors as speculation intensifies that the Federal Reserve will begin cutting interest rates in the first quarter of 2007 to supplement slower economic growth and reduced inflation pressures. In terms of economic data the Dollar continued to tumble against Sterling as the weekly jobless report showed an unexpected rise in the number of new claims. With speculation building that the U.S unemployment rate is set to jump from 4.4% to 4.6%, we can expect the Dollar to struggle in the build up to the Nonfarm payrolls figures early next month.

The Euro advanced against the Dollar yesterday following a hawkish rhetoric from the Primeminister of Luxembourg, Jean Claude Juncker, who stated that the European Central Bank should keep its political independence and discarded recent concerns from Jacques Chirac over rising interest rates and the strength of the Euro. The single currency has also held firm against the Pound this morning despite a worse-than-expected report on German economic growth, which showed that Europe's largest economy had slowed in the third quarter, primarily due to a slowdown in construction spending. German GDP, the value of all goods and services, rose 0.6% from the second quarter following the fastest growth since 2000 but it seems the report will do little to stop the ECB from raising Euro-zone interest rates early next month. However, the Euro may come under some pressure later today as German business confidence is expected to decline in November on concerns that rising interest rates and the highest sales tax increase since the Second World War will weigh heavily on economic expansion next year.

The Pound made significant gains against the Dollar yesterday and held firm against the Euro following the release of the minutes from the Bank of England's last policy meeting where the MPC elected to lift UK interest rates for the second time this year. The committee voted 7-2 in favour of a rise in rates with David Blanchflower and Rachel Lomax deciding to keep borrowing costs unchanged, expressing downside risks to demand and inflation. Policy makers elected to lift the benchmark interest rate to 5.0% on concerns that wage growth would keep inflation above the government's 2.0% target. However, the minutes didn't give away too many clues with regards future monetary policy and it seems that the BoE will adopt a 'wait and see' policy over the coming months and if the projected rise in wage growth doesn't occur then rates may stay at 5.0% for some time.

Data Released 23rd November

EU 09:00 Current Account Balance (September)

GER 09:00 Ifo Business Confidence Index (November)

U.S Thanksgiving Holiday - Market Closed

written by Adam Solomon

The Pound found further support against the majors yesterday, firming an additional 0.1% against both the Euro and the Dollar as we break back above 1.9000. The Confederation of British Industry released their monthly industrial trends survey yesterday, which unexpectedly showed a pick-up in the sector for November following last month's weakness. The report showed that demand for British made goods was still high despite the Pound's strength over the past quarter and gave way to suggestions that the Bank of England may continue monetary tightening in 2007. The focus this week in terms of economic data will be the minutes from the BoE's last policy meeting released this morning. The MPC elected to lift UK interest rates for the second time this year in November and it will be interesting to gauge just how the 8-strong committee voted and the language and tone of the report may also provide some insights into future policy.

The Euro managed to hold firm against the Dollar yesterday despite a damaging report on French gross domestic product, which showed that the economy failed to expand in the third quarter following the fastest growth in nearly six years at the beginning of 2006. However, the Euro has received a modest boost this morning as a separate report on French consumer spending showed an unexpected rise in October after unemployment fell to a five-year low. In addition, Euro-zone industrial orders, due for release later this morning, are expected to fall lower as demand from the U.S dwindles in the face of slowing economic growth.

With the Thanksgiving holidays dominating the American calendar this week, there has been a distinct lack of economic data to drive the Dollar. However, a report this afternoon on U.S consumer confidence is expected to remain at an elevated level in the month of November after achieving a 15-month high in October. In recent months, significantly lower petrol prices and a strong labour market has helped supplement the dramatic slump in housing this year as the Federal Reserve raised U.S interest rates seventeen times over a 2-year campaign. The University of Michigan's final index of consumer sentiment is widely anticipated to show a modest decline towards a reading of 93.3 in November. While elsewhere, a separate report on initial jobless claims is expected to show that the number of Americans filing for benefits remained largely unchanged in the last week.

Data Released 22nd November

UK 09:30 BoE MPC Minutes

EU 10:00 Industrial Orders (September)

U.S 13:30 Initial Jobless Claims (w/e 18th November)
U.S 15:00 Michigan Sentiment (November Final)

written by Adam Solomon

The Pound advanced against the majors yesterday, firming 0.1% against both the Euro and the Dollar following a distinct lack of fundamental data released in the States and in Europe. The Rightmove index showed that UK house prices accelerated to the fastest annual pace for 2-years in November but it is widely anticipated that prices may of peaked following the Bank of England's decision to lift interest rates by a half a percentage point since August. In addition, a separate report on M4 Lending showed that UK money supply remained close to the 16-year high in October.

The Pound made gains in the aftermath of the figure as the continued strength in money supply supported the view that UK interest rates could potentially rise once more in this tightening cycle. The Pound may find further support this morning following a report from the Confederation of British Industry into the state of the UK manufacturing and the survey should provide some insights into the industrial sector over the past month.

The Euro made modest gains against the Dollar yesterday despite the lack of economic reports coming out of the Euro-zone. However, the chairman of the European Central Bank, Jean-Claude Trichet, reiterated his hawkish stance with regards monetary policy as he stressed that his institution remained "strongly vigilant" in assessing inflation risks, a term we have become all to familiar with in recent months as a signal that Euro-zone interest rates are set to rise once more the following month. However, there has already been some significant data released this morning as a report on French GDP showed that the economy failed to grow in the third quarter following the fastest economic expansion in almost six years in the previous three months.
Data Released 21st November

UK 11:00 CBI Industrial Trends Survey (November)

written by Adam Solomon

Following a barrage of significant economic reports released last week, we can expect a relatively quiet week in terms of data with the focus falling on the minutes from the Bank of England's last policy meeting where the MPC elected to raise UK interest rates to 5.0%. The language and tone of the minutes will prove significant in determining the outlook for future monetary policy but the Pound may come under further pressure if the eight-strong committee were divided in the decision to raise rates by a quarter-point earlier this month. Over the past week the Pound has continued to deteriorate against the majors as weak inflation numbers diminished the prospect of any further monetary tightening this year. The Pound has received a timely boost this morning following a report on the UK housing market as prices rose at the fastest annual pace in two years for the month of November.

The positive sentiment surrounding the Euro has gathered momentum in recent weeks and that trend looks set to continue amid a sparse supply of European economic reports released this week. The German Ifo index into business confidence is widely expected to remain at a relatively low level despite the obvious improvement in economic growth this year, which has accelerated at the fastest pace since 2000. Concerns and uncertainty surrounding the planned VAT increase at the start of next year will also have an impact on German retail sales, which is expected to bounce back in October as consumer's flock to the highstreet to avoid paying a higher tax percentage.

With the Thanksgiving holiday dominating the American calendar this week, the Dollar may be left exposed amid a sparse supply of significant economic events with the focus falling on the final estimate of the Michigan sentiment survey for November. The index is widely expected to show a modest increase from the previous month as consumer spending continues to show signs of a revival as we approach the festive period.

Data Released 20th November

UK 09:30 M4 Sterling Lending (October)
UK 09:30 PSNCR (October)

written by Adam Solomon

The Pound came under renewed pressure yesterday, dropping 0.5% against the Dollar from an 18-month high earlier in the session and a further 0.1% versus the Euro following a band of weak economic reports. UK factory-gate inflation accelerated at the slowest annual pace in over two years for the month of October as energy prices continue to decline. Producer output prices climbed just 1.7% year-on-year last month, which is the lowest since March 2004 and well under market expectations. As a result, the Pound declined against the majors and therefore the release of the UK consumer price index this morning will take on added impetus as inflation is predicted to rise to 2.6% year-on-year in October, which is way in excess of the government's 2.0% target and may result in fresh calls for a further tightening of UK interest rates.

The Euro continued to make gains against the majors yesterday, firming an additional 0.3% against the Dollar to trade at a 10-week high despite the apparent lack of any fundamental data. However, the single currency may come under some pressure this morning as European economic growth probably slowed in the preliminary estimate for the third quarter following the fastest growth in 6-years earlier in the year. The slowdown in economic expansion can be attributed to a variety of factors including higher interest rates, the planned value-added tax increase in Germany and the sharp downturn of growth in France over the last quarter. Elsewhere, the Euro may come under further pressure as German economic growth slowed by more than forecast in the third quarter while the ZEW survey may show a further drop in investor confidence this month.

Initially, the Dollar declined against the major currencies yesterday and we may see further losses this afternoon amid a plethora of significant economic reports with U.S retail sales expected to fall for a second month in succession in October following the sustained drop in fuel prices over the same period. Sales may slip 0.4% from September while a separate report on U.S producer price inflation may also show a second consecutive decline, the first back-to-back decrease since June 2004. Producer prices is expected to show a further 0.5% drop in prices for the month of October, which only emphasises moderating inflationary pressures in the States, which in turn leads to increased speculation that the next move for the Fed will be a cut in U.S interest rates. However, the focus today in terms of economic reports will be the minutes from the last FOMC rate announcement where policy makers elected to hold rates at 5.25% and it will be interesting to see if the report provides an insight into future monetary policy.

Data Released 14th November

UK 09:30 Consumer Price Index (October)

EU 10:00 Flash GDP (Q3)

GER 10:00 ZEW Expectations Balance (November)

U.S 13:30 Retail Sales (October)
U.S 13:30 Business Inventories (September)
U.S 13:30 Producer Price Index (October)
U.S 19:00 FOMC Minutes 24th October Meeting

written by Adam Solomon

The Pound advanced to the highest level this year against the Dollar last week following a combination of weak U.S economic data and the Bank of England's decision to lift UK interest rates to 5.0% in an attempt to rein in inflation and maintain price stability. There is a plethora of significant data released this week in both the States and in Europe, which should provide some direction with regards future monetary policy. The focus will fall on the BoE quarterly inflation report on Wednesday, which is expected to give an insight into the outlook for UK interest rates and it will be interesting to see whether the scale of monetary tightening since August has been sufficient to keep inflationary pressures relatively under control. The recent positive sentiment surrounding the Pound may continue with the data released this morning as the monthly producer price index is expected to show modest growth in output prices for the month of October with the annual rate rising to 1.9%.

The Euro made some gains against Sterling last week after the BoE left the outlook for UK interest rates unclear coming into year-end while the market was hoping for a good indication of further monetary tightening in the first quarter of 2007. In addition, a number of ECB board members and policy makers have publicly called for a more aggressive stance towards a further rise in Euro-zone interest rates after the chairman, Jean-Claude Trichet gave a strong indication that rates are set to rise for the fifth time this year in the first week of December. In terms of economic data, the Euro may come under pressure from a report on the headline measure of European inflation, which is expected to remain unchanged at 1.6% while the core estimate may drop to 1.4%, which is still well under the Central Bank's 2.0% target suggests that growth in the economy may begin to moderate.

The Dollar declined against the majors last week, falling to two-month low against the Euro despite a host of positive economic reports as the shortfall in trade actually narrowed by more than anticipated in September and U.S consumer confidence remained close to the highest level in 15 months. Nevertheless, the Dollar continued to come under increased pressure as the political tension surrounding the U.S mid-term elections culminated in the Democrats clinching majority seats in both houses for the first time since 1994. There is a packed calendar of U.S data released this week including the minutes from the Federal Reserve's last interest announcement where policy makers elected to hold rates at 5.25%. Elsewhere, the Dollar may continue to struggle amid a mass of economic reports with the focus largely falling on U.S retail sales, which is expected to ease a further 0.3% while elsewhere, U.S consumer price inflation is expected to remain relatively unchanged at 2.9% excluding the volatile food and energy.
Data Released 13th Nov

UK 09:30 Producer Price Index (October)
- Output

UK 09:30 DCLG House Prices (September)

written by Adam Solomon

The Pound unexpectedly declined against the Euro yesterday, dropping 0.7% to trade well under 1.4900 by the close last night despite the Bank of England's decision to lift interest rates by a further quarter-point to 5.0% with the aim of containing inflation and avoiding demands for higher wages. The MPC and the governor of the BoE, Mervyn King, raised their benchmark lending rate to a 5-year high yesterday but the accompanying statement left no clues as to future policy and whether monetary tightening will continue into 2007. The statement struck a fairly neutral tone with regards a further rise in rates and as a result, the Pound declined against the Euro as the tone of the statement left the outlook on UK interest rates uncertain. In terms of economic data, The Pound received a boost as a report on the UK global trade balance showed that the deficit in goods and services actually narrowed for the second consecutive month in September with the shortfall coming in at £6.6 Billion.

The positive sentiment surrounding the Euro has been gathering momentum this week following a host of positive economic data, which has only reiterated comments from a number of ECB members calling for a further rise in European interest rates next month and into the new year. The Euro made significant gains against the Pound yesterday and firmed up an additional 0.7% against the Dollar to trade at a two-month high following a particularly hawkish rhetoric from an executive board member within the ECB who stated that leaving interest rates at 3.25% would be 'too accommodating' and the Central Bank must remain 'vigilant' to contain inflation. The speech mirrored comments from the chairman, Jean-Claude Trichet, last week and it seems increasingly likely that the Central Bank will lift rates to 3.50% by the year-end and therefore, the Euro may make further gains against Sterling over the coming month.

The Dollar came under increased pressure against the majors yesterday despite a host of positive economic data including a report on the U.S trade balance, which showed that the ever-widening deficit in goods and services shrank by the most in over two years for the month of September as the value of oil plummeted by up to 25% since mid-July. The shortfall in trade was smaller than expected at $64.3 billion after an all time high set the previous month of $69 Billion and with energy prices dropping significantly and the continued weakness of the dollar, U.S exports should rise over the coming months. Elsewhere, a separate report showed that U.S consumer confidence remained close to the highest level in 15 months for November as cheaper fuel prices and an expanding labour market encouraged consumers onto the highstreet. Initially, the Dollar made some gains against the Pound, briefly dropping under 1.9000 before the announcement that the Democrats had clinched majorities in both houses of the U.S Congress for the first time since 1994 after winning the Senate seat in Virginia, condemning George W Bush as a "lame duck President' for the remainder of his term in office. The political tension surrounding the dramatic return to power on Capitol Hill sent the Dollar crashing to a new yearly low against the Pound as we trade above 1.9100.

Data Released 10th November

U.S Veterans Day - Public Holiday

written by Adam Solomon

The Pound remained largely unchanged against the majors yesterday as we build up to the Bank of England interest rate announcement at midday today and it is widely anticipated that the monetary policy committee will raise UK interest rates to 5.0%, the highest lending rate in 5-years, as inflation still holds above the government's 2.0% target. In a recent speech to the House of Lords economic affairs committee, the governor of the BoE, Mervyn King, gave a strong indication that a rise in rates was likely this month as the economy expanded at the fastest pace in two years over the last quarter. The Pound may make some gains against the majors although the decision to lift rates by a further quarter-point has been largely factored into the market over the past month and we will have to wait until the 15th November and the release of the minutes of the meeting to get an insight into future policy and whether UK interest rates will continue to rise in the first quarter of 2007. In terms of economic data, the Pound may receive a boost this morning following a report on the UK global trade balance, which is expected to show that the deficit in goods and services actually narrowed in September.

The Euro held firm against the Dollar yesterday and made modest gains versus the Pound despite a distinct lack of economic data released both in Europe and the U.S. However, this morning the single currency may receive a much needed boost following the publication of the ECB monthly bulletin, which is expected to mirror the hawkish rhetoric from the recent press conference where the chairman of the ECB, Jean-Claude Trichet, gave a clear signal that European interest rates are set to rise for the fifth time this year in December. In addition, the ECB banking press conference will be watched with interest today as we await any further indication that policy makers will continue monetary tightening into 2007.

The Dollar remained unchanged yesterday and close to the recent lows achieved against the Euro and the Pound as the impact of Tuesday's mid-term elections saw the Democrats take control of the House of Representatives while control of the Senate still remains in the balance. There is a plethora of significant economic factors that could potentially influence the Dollar this afternoon with the focus falling on the release of the U.S trade balance, which is widely expected to narrow from a record level in September as oil prices fell and demand from abroad spurred U.S exports. The gap in trade for goods and services may of narrowed by the most in nearly two years to $66 Billion as oil prices scaled back by 25% since mid-July and the value of the dollar dropped, making exports for attractive to foreign investors.

Data Released 9th November

UK 09:30 Global Trade Balance (September)
- EX EU Trade

UK 12:00 Bank of England Interest Rate Announcement

EU 09:00 ECB Monthly Bulletin Published

U.S 13:30 Trade Balance (September)
U.S 13:30 Export Prices / Import Prices (October)
U.S 13:30 Initial Jobless Claims (w/e 4th November)
U.S 15:00 Michigan Sentiment (November Prelim)
U.S 15:00 Wholesale Inventories (September)

written by Adam Solomon

The Pound made further gains against the majors yesterday, firming 0.4% against the Dollar and a further 0.1% versus the Euro following a band of positive economic data, which only emphasised the need for a further rise in UK interest rates. Firstly, the National Institute of Social and Economic Research released a positive forecast into UK economic growth in the three months to October with the economy expanding 0.7% in the last quarter despite the BoE's decision to lift interest rates in August. The robust growth in housing, manufacturing and the service sector combined with an obvious pickup in consumer sentiment has propelled economic growth this year and it seems increasingly likely that the BoE will continue monetary tightening into the first quarter of 2007. Elsewhere, the Pound received a further boost as the British Retail Consortium released their monthly survey, which showed modest growth in sales for the month of October with the core rate up 2.6% year-on-year last month and the report will only fuel speculation that the MPC are set to raise their benchmark lending rate to 5.0% in the monthly announcement tomorrow.

The somewhat positive sentiment surrounding the Euro continued yesterday after Euro-zone retail sales unexpectedly rose to a reading of 52.8 in October, which reinforces suggestions that the European Central Bank will lift interest rates for the fifth time this year in the first week of December. The pickup in consumer spending may help fuel economic growth in the final quarter of the year as the economy has to cope with significantly higher borrowing costs and a drop in Euro-zone exports as the slowdown in U.S economic growth continues to weigh on demand. The Euro rose 0.4% against the Dollar but came under further pressure against the Pound following a separate report on German industrial production, which declined for the first time in three months in September.

The Dollar came under increased pressure yesterday following comments from Janet Yellen, president of the San Francisco Fed, who said that some countries with high liquidity were less likely to invest money in the U.S, a sentiment previously echoed by the former Federal Reserve chairman Alan Greenspan. In addition, the Democratic Party won control of the House of Representatives in the U.S mid-term elections last night while overall control of the upper house remains too close to call that a re-count may be needed. However, some economists had expected the Dollar to make gains in the event of a Democratic victory, which would limit the Republican's ability to influence geo-political risk.

Data Released 8th November

No Data of Significance

written by Adam Solomon

The Pound made further gains against the majors yesterday, firming 0.4% against the Dollar and a further 0.1% versus the Euro following a band of positive economic data, which only emphasised the need for a further rise in UK interest rates. Firstly, the National Institute of Social and Economic Research released a positive forecast into UK economic growth in the three months to October with the economy expanding 0.7% in the last quarter despite the BoE's decision to lift interest rates in August. The robust growth in housing, manufacturing and the service sector combined with an obvious pickup in consumer sentiment has propelled economic growth this year and it seems increasingly likely that the BoE will continue monetary tightening into the first quarter of 2007. Elsewhere, the Pound received a further boost as the British Retail Consortium released their monthly survey, which showed modest growth in sales for the month of October with the core rate up 2.6% year-on-year last month and the report will only fuel speculation that the MPC are set to raise their benchmark lending rate to 5.0% in the monthly announcement tomorrow.

The somewhat positive sentiment surrounding the Euro continued yesterday after Euro-zone retail sales unexpectedly rose to a reading of 52.8 in October, which reinforces suggestions that the European Central Bank will lift interest rates for the fifth time this year in the first week of December. The pickup in consumer spending may help fuel economic growth in the final quarter of the year as the economy has to cope with significantly higher borrowing costs and a drop in Euro-zone exports as the slowdown in U.S economic growth continues to weigh on demand. The Euro rose 0.4% against the Dollar but came under further pressure against the Pound following a separate report on German industrial production, which declined for the first time in three months in September.

The Dollar came under increased pressure yesterday following comments from Janet Yellen, president of the San Francisco Fed, who said that some countries with high liquidity were less likely to invest money in the U.S, a sentiment previously echoed by the former Federal Reserve chairman Alan Greenspan. In addition, the Democratic Party won control of the House of Representatives in the U.S mid-term elections last night while overall control of the upper house remains too close to call that a re-count may be needed. However, some economists had expected the Dollar to make gains in the event of a Democratic victory, which would limit the Republican's ability to influence geo-political risk.

Data Released 8th November

No Data of Significance

written by Adam Solomon

The Pound lost more ground against the majors yesterday, falling 0.7% against the Euro and a further 0.2% versus the Dollar following a round of disappointing UK economic data. Manufacturing output unexpectedly slowed in the month of September with factory production unchanged after expanding in each of the previous four months. The decline in production is likely to be a result of the dramatic slowdown in U.S economic growth in the third quarter, which grew at the slowest pace in over three years in the last quarter and therefore, demand for UK exports in the States has subsequently declined. However, the report will have a minimal affect on the outcome of the November interest rate announcement this Thursday and it is widely anticipated that the Bank of England will lift UK interest rates to 5.0%. Although, the disappointing report on manufacturing will act as a reminder that any further monetary tightening will be limited in the face of slowing economic growth and falling energy prices. There is some significant data released in the UK this morning with the focus falling on the BRC retail sales survey and the consensus forecast suggests a moderate decline for the third consecutive month in October, which gives an indication that UK consumer spending will be weak in the fourth quarter.

The Dollar managed to make gains yesterday despite a sparse supply of economic data released in the States although the political tension surrounding the impending U.S mid-term election is increasing with some analysts anticipating that a Democratic victory in either the House or the Senate could boost the Dollar. In addition, some surprisingly hawkish comments from Federal Reserve member Michael Moskow sent the Dollar higher against the Pound yesterday as he reopened the debate surrounding U.S monetary policy, saying a further rise in interest rates may be needed in order to bring inflation back under control.

The Euro made gains against the majors yesterday, firming an additional 0.1% against the Dollar despite a round of poor economic data as growth in the European service industries, which represents the biggest part of the economy, unexpectedly slowed in October. The purchasing manager's index on the service sector fell to a reading of 56.5 last month, the fourth consecutive monthly decline, and the report suggests that the fastest economic growth in six years may have peaked in the twelve nations sharing the Euro. The Euro may receive a further boost this morning following a report on Euro-zone retail sales for the month of September, which is widely expected to rise by 0.4% while the core rate may slow to 2.0%. However, falling unemployment, lower oil prices and rising consumer sentiment may not be enough to boost spending as downside risk comes from the impending value added tax increase in Germany, which has seen German retail sales plunge to 1.7% over the last month.

Data Released 7th November

UK 11:00 BRC Retail Sales Survey (October)

EU 10:00 Retail Sales (September)

GER 11:00 Industrial Production (September)

written by Adam Solomon

Without doubt, the focus this week will fall on the Bank of England interest rate announcement on Thursday where the monetary policy committee are widely expected to lift UK interest rates by a further quarter-point to 5.0% as inflation still remains above the government's 2.0% target despite a sustained drop in energy prices and the unfolding U.S economic slowdown on the global economy. However, with inflation running at 2.4% and the continued growth in the housing market, policy makers will be careful not to repeat past mistakes and ensure price stability is maintained while we wait for the 15th November and the release of the minutes of the meeting for an indication as to whether the BoE will need to continue raising rates into 2007. In terms of economic data, the Pound may receive a boost this morning as UK industrial production is widely expected to increase by 0.3% month-on-month in September while manufacturing output may rise to an annual rate of 2.4%.

The Euro has been struggling against the Pound over the past month and that trend continued last week despite a very good indication from the chairman of the ECB, Jean-Claude Trichet, that Euro-zone interest rates will be lifted for the fifth time this year in December. Although policy makers kept their benchmark lending rate on hold at 3.25% in November, the accompanying press conference adopted a much more hawkish rhetoric with regards future policy as Trchet used the trigger words "strong vigilance" to signal a further rate hike the following month. There is a sparse supply of economic data released this week in the Euro-zone and the Euro may receive a much needed boost this morning with the release of German manufacturing orders for the month of September, with factory orders expected to soar to 11.5% from August. Elsewhere, growth in European service industries probably accelerated in October, driven by higher oil prices, which in turn leads to increased spending as the index rose to a reading of 57 from 56.7 in September.

Following on from last week, the Dollar ended the week on a positive note as the monthly U.S job report came in better-than-expected in October as the economy added 92,000 jobs while September nonfarm payrolls was revised up to 140,000. In addition, average hourly earnings increased by 0.4% from September as U.S unemployment unexpectedly shrank to 4.4% from 4.6%. As a result, the Dollar made significant gains against the Pound as we dropped below 1.9000 in the aftermath of the figure. However, the Dollar may continue to remain vulnerable amid a sparse supply of economic data released this week with the focus falling on the U.S trade report on Thursday, which is expected to show that the deficit in goods and services actually narrowed in September led by lower oil imports.

Data Released 6th November

UK 09:30 Industrial Production (September)
- Manufacturing Output

EU 09:30 PMI Services (October)
EU 10:00 Producer Price Index (September)

GER 11:00 Manufacturing Orders (September)

written by Adam Solomon

The Euro advanced yesterday, firming 0.2% against both the Euro and the Dollar as the ECB kept Euro-zone interest rates on hold at 3.25% but clearly signalled a further tightening of monetary policy could be expected in December. In the accompanying press conference, the chairman of the Central Bank, Jean-Claude Trichet, used the specific language that we have come to associate with a trigger to the market that policy makers are scheduled to lift interest rates the following month. Trichet reiterated that "strong vigilance" was still required in order to rein in inflation to a level consistent with price stability. However, the Euro only managed to make modest gains against the majors and we can deduce that the hawkish rhetoric of the statement was widely anticipated by the market and investor's had factored in a good chance of a further quarter-point rate hike in December. In terms of economic data, the Euro received a further boost from a report on European manufacturing, which accelerated by more than expected last month and with economic growth accelerating at the fastest pace in 6-years combined with an increase in money supply to the Euro-zone, the ECB may continue raising rates into 2007. The Euro may come under some pressure this morning following a report on European retail sales for the month of September, which is widely anticipated to decline by 0.2% from August.

The Pound has been advancing all week against the majors on speculation the Bank of England will lift UK interest rate twice more by the middle of next year as inflation continues to remain above the government's 2.0% target. Sterling has risen to a 16-month high against the Euro this week and achieved a one-year high versus the Dollar at 1.9130 as we anticipate a probable rise in rates to 5.0% next week when the BoE monetary policy committee meets on the 9th November. Following a sparse supply of economic news yesterday, the Pound may receive a boost this morning with a report on the Purchasing Manager's index for UK manufacturing, which is expected to post a modest decline in October although a reading above 50 indicates expansion.

There is a host of significant economic data released this afternoon in the States with the focus falling heavily on the monthly U.S job report, which historically is increasingly difficult to predict and normally always moves the market. U.S nonfarm payrolls is expected to show robust growth in October with the economy adding twice as many jobs from the previous month at 120,000 while the unemployment rate may stay at five-year low at 4.6%. The Dollar may make real gains against the majors if the figure comes out in excess of expectations as growth in the labour market and rising incomes propels economic growth in the face of the biggest housing decline in 15-years. Elsewhere, a separate report from the Institute of Supply and Management may show that U.S service industries grew at a faster pace than expected in October with the index of non-manufacturing businesses rising to a reading of 54.5 last month.

Data Released 3rd November

UK 09:30 CIPS Services PMI (October)

EU 10:00 Retail Sales (September)

U.S 13:30 Nonfarm Payrolls (October)
U.S 13:30 Average Earnings (October)
U.S 13:30 Unemployment Rate (October)
U.S 13:30 ISM Non-Manufacturing (October)

written by Adam Solomon

Following a sparse supply of economic data released yesterday, the focus today will fall heavily on the ECB interest rate announcement at midday and perhaps more significantly, the accompanying press conference where the chairman, Jean-Claude Trichet, may signal a further rate increase in December. In each of the prior months to a rate hike in the Euro-zone, Trichet has used a specific terminology that prepares the market for a further tightening of monetary policy the following month and if he reiterates that "strong vigilance" is still required, the Euro should receive a timely and much needed boost. Elsewhere, there is some significant data released this morning in the shape of the Purchasing Manager's report on European manufacturing and it is widely anticipated that the index will remain relatively unchanged at a reading of 56.7 in October.

The positive sentiment surrounding the Pound continued yesterday, rising 0.1% against the Euro and a further 0.2% against the Dollar, registering its highest reading this year at 1.9130, which was the high from the previous upside move. Sterling advanced despite a weaker-than-expected reading on UK manufacturing, which slowed to a reading 53.7 in October and suggests that economic expansion may be slowing in the fourth quarter. The pick-up in the service and manufacturing sector is key in the prospect for a further rise in UK interest rates and with factory production contributing to 15% of UK gross domestic product, the report yesterday will only fuel concerns that growth in the sector is slowing and will therefore curb economic expansion. However, the report also highlighted that output prices had risen to the second highest level in almost 3-years last month and with companies charging higher prices, it seems evident that the BoE will surely lift interest rates to 5.0% next week.

The Dollar fell to a fresh one-month low against the Euro yesterday following a damaging report on U.S manufacturing, which unexpectedly registered its lowest reading since June 2003 as factory production slowed following a decline in auto sales and a major slump in the housing market. The ISM factory index fell to 51.2 in October and although a reading above 50 indicates expansion, growth in the sector is obviously slowing and will be unable to bolster the economy over the coming months. The report is the latest in a string of weak economic data and contradicts recent hawkish rhetoric from Fed officials calling for a further rise in U.S interest rates from the current 5.25%. Elsewhere, a separate report showed that construction spending unexpectedly declined last month while the ADP employment report, which provides an insight into the Nonfarm Payrolls numbers this Friday and showed that U.S companies created 128,000 jobs in October, the most in four months.

Data Released 2nd November

GER 09:00 Unemployment (October)

EU 09:00 Manufacturing PMI (October)
EU 12:45 ECB Rate Decision
13:30 ECB Press Conference

U.S 13:30 Initial Jobless Claims (w/e 28th October)
U.S 13:30 Unit Labour Costs / Productivity (Q3)
U.S 15:00 Factory Orders (September)

written by Adam Solomon

The Pound made yet further gains against the majors yesterday, firming an additional 0.3% against the Dollar and 0.1% versus the Euro by the close last night, although Sterling did achieve a new yearly high against the single currency at 1.4980 earlier in the session. There was some positive economic data released yesterday as the Nationwide index for UK house prices increased by 0.7% in October, which will only fuel speculation that the Bank of England have the capacity to raise interest rates next month. The average cost of a home rose 0.7% from September to £169,623 while prices also climbed 8.0% year-on-year, the second highest level since February 2005. There is a sparse supply of economic data released in the UK this morning with the focus falling on the purchasing manager's report on manufacturing, which is forecast to show a modest drop towards a reading of 54.0 in October following robust gains the previous month.

The Euro has been under increased pressure against Sterling this week and the single currency lost yet more ground yesterday following a disappointing report on German retail sales, which unexpectedly dropped by the most in over two years in September as concerns over slowing economic growth and higher taxes next year, prompt consumers to curb spending. Sales fell 1.7% from August, the biggest decline since May 2004 while elsewhere, French consumer confidence dropped for the first time in five months. However, the Euro managed to stem the flow of bad news following a report into European consumer and industrial confidence, which increased by more than expected in October and it seems that the ECB's concerns that inflation will bounce back from a 2-year low are well founded. The sentiment index rose to a reading of 110.3 from September, the highest level since February 2001 while a gauge of Euro-zone inflation came in at 1.6%, staying below the ECB's 2.0% target for a second month in succession as oil prices continue to decline.

The rapid decline of the Dollar continued yesterday following a string of weak economic data that pushed the currency down to a one-month low against the Euro and rekindled concerns that the U.S economy was set for a hard landing next year. Firstly, a report on consumer sentiment showed that confidence had unexpectedly dropped to a reading of 105.4 in October despite the dramatic fall in energy prices over the last month. The uncertainty surrounding the U.S labour market is obviously causing concern for the consumer and it was widely thought that spending, which makes up two thirds of the economy, would help bolster economic growth and soften the blow of the slump in the housing sector. Elsewhere, the Chicago purchasing manager's index showed that business activity expanded at the slowest pace in over a year last month as a softening housing market continues to weigh heavily on economic growth. There is a host of significant data released in the States this afternoon with the focus falling on the ISM index into U.S manufacturing and the consensus forecast suggests a modest rise of 0.1% in October as growth in the sector remains near the 16-month low from September.

Data Released 1st November

UK 09:30 CIPS Manufacturing PMI (October)

U.S 13:15 ADP Employment Report (October)
U.S 15:00 Construction Spending (September)
U.S 15:00 ISM Manufacturing (October)
U.S 15:00 Pending Home Sales (September)

written by Adam Solomon