Eurozone heads towards recession as UK retail sector continues to hemorrhage highstreet names
15/Jan/2013 • Currency Updates•
The markets are still filled with uncertainty, with the euro-zone set to head into recession after poor output data released yesterday, and the household name HMV going under in the UK. In addition, concerns over the US having it’s credit rating reduced when it reaches its debt ceiling, further adds to the vagueness surrounding world markets.
This is a big day for sterling, with CPI and PPI figures both out today at 9:30 GMT. Consensus for inflation is that it will remain at 2.7% (YoY), with an expectation of an increase to 0.5% from last months 0.2% for (MoM) CPI.
Arguably the most important figure out today for sterling is the Core CPI measure, which will be watched closely by traders.
Yesterday, sterling stayed low against the euro, with no major movements from open to close. This is most likely due to the effects of the optimistic sentiments of the ECB starting to teeter out in the face of greater negative growth figures for industrial production in the eurozone. Sterling fell marginally against the dollar yesterday.
Yesterday saw the euro strengthen marginally against sterling, still following the optimistic sentiments of the ECB on the euro crisis when they met last week. This strengthening against sterling is likely to tail off further during this week, as data published yesterday showed (YoY) industrial production for the eurozone as down 3.7%, a higher reduction than the consensus of 3.2%.
The euro’s strengthening against USD also levelled out yesterday conversely to its rapid strengthening last week. Today has already seen the CPI and GDP growth figures published for Germany at: 0.7% (lower than the expected 0.8%), and 2.1% (as expected), respectively.
We are also looking to eurozone trade balances, although these are unlikely to affect the currency movements too much today.
The dollar started to level out yesterday against both EUR and GBP, after last week’s negative movements lead by poorer trade data than expected. Bernanke spoke yesterday and expressed concerns regarding the ever encroaching debt ceiling, which Obama refuses to negotiate upwards in exchange for spending cuts.
In addition, it is generally expected that eyes will be looking forward to the next meeting of the FOMC later this month (24th/25th Jan), where uncertainty still presides. However, today is a big day for USD, with important data regarding PPI and retail sales growth being published at 1:30pm, with a general consensus being a contraction in both.