Business growth stalls in the Eurozone, heightening fears of an economic contraction
21/Nov/2014 • Currency Updates•
The UK currency rose against its peers for a second consecutive day after positive retail sales figures were released. Sterling climbed 0.25% on the Dollar and 0.4% on the Euro during London trading on Thursday.
More encouraging news for the UK economy yesterday as the ONS announced real retail sales rose by 0.8% in October to an annualised 4.3%, comfortably above expectations. This was fuelled by a fall in prices, with average prices falling by 1.5% in the past twelve months, the largest decline since December 2002. This figure was the highest since April despite online sales showing a slight loss of momentum in the lead up to Christmas. The Pound was also boosted by retail sales excluding fuel, which rose to 4.6%, also its highest figure in six months.
Today is a quieter day in the UK with the only major release the public sector net borrowing figure from National Statistics at 9:30am.
The single currency remained mostly stable on the Dollar despite disappointing output data across the board yesterday.
The Euro came under pressure on Thursday morning after some very weak PMI data was released. Markit’s manufacturing PMI data for Germany, France and the Eurozone all disappointed again, falling on October levels. The manufacturing index for France contracted for the third consecutive month at 47.6, while the German and Eurozone sectors stalled at 50.0 and 50.4 respectively. Services growth was just as worrying, with the PMI for the Eurozone declining to its lowest position since January of 51.3, while the composite output index dropped to 51.4 in November, its lowest score since as far back as July last year. Economic growth appears to be teetering, with GDP likely to have risen by just 0.1-0.2% in Q4 according to Markit’s Chief Economist.
Elsewhere, consumer confidence in November also came up short to further dent Euro strength as it fell unexpectedly to -11.6, its lowest position since February. The main event in global markets today will be a speech by ECB President Draghi at 8am London time.
The Dollar fell just short of 0.1% against its major counterparts on Thursday after mixed releases from across the pond.
Inflation in the US remained marginally shy of the Federal Reserve target in October, defying analysts who predicted a slight decline. The Consumer Price index held firm at 1.7% despite the sharp decline in world oil prices, which have now dropped by 30% since the summer. The flat reading will feed the debate surrounding potential Fed activity, with below targeted inflation now seen as the only major stumbling block to a US interest rate hike. The core figure, which excludes food and energy prices, actually rose in October to 1.8%, its highest YoY increase since July.
The four week average jobless claims rose marginally to 287,500, although remained below 300,000 for a tenth consecutive period, a further sign that the labour market is tightening. In a busy data day, the Manufacturing PMI fell from 55.9 to 54.7, although existing home sales and the Fed’s manufacturing survey both increased month on month to 5.26M and 40.8 respectively. Elsewhere, the Conference Board’s Leading Indicator data for October, a measure of overall economic activity, unexpectedly rose to 0.9% from 0.7% to further boost the Dollar.
Rest of the world
In the world markets, Norway’s Krone is showing signs of climbing clear of its thirteen year low this month as deflation appears to have been curbed. The currency has now rallied 1.8% since its record low two weeks ago.
Elsewhere, the Nigerian Naira slumped to another record low with stocks retreating by the most in the world, ahead of the country’s central bank meeting. The currency declined by 1.2% against the Dollar, marking a fourth day of declines.