Markets quiet ahead of Eurozone Targeted LTRO release

Claire Hogarth11/Dec/2014Currency Updates

GBP

A lack of significant economic announcements in the major economies led to a fairly muted day of fluctuation for Sterling. Having traded within a narrow band for most of the day, the Pound appreciated by 0.15% on the Dollar.

Britain’s trade deficit narrowed in October to a seven month low it was revealed yesterday. The total trade deficit fell to just over £2 billion from £2.8 billion in September as a result of lower oil imports and a climb in exports. Imports fell by £700 million, helped by a weaker Eurozone economy and the global decline in oil prices which have plummeted by 40% since the summer. Meanwhile, a strong demand for silver, predominantly from India, allowed exports to edge up to £24.3 billion in October. Away from data releases, the British Chambers of Commerce warned raising interest rates next year would pose a huge risk to the economy, while it also revised down its growth forecasts from 3.2% to 3% for 2015.

Today promises to be a muted data day in the UK with the only announcement of any note the RICS Housing Price Balance before markets open in London.

EUR

The Euro climbed on both the greenback and the Pound again on Wednesday by 0.35% and 0.25% respectively.

Industrial output in France fell unexpectedly in October by 0.8%, compared with September, data from Insee showed yesterday. This, after the market had anticipated a slight rise of 0.1%, caused the single currency to fall against the Dollar during early trading. Earlier, nonfarm payrolls in Europe’s second largest economy fell by 0.3% in quarter three and in the process registered its greatest quarterly decline since Q1 of 2013. Meanwhile, concerns surrounding the political situation in Greece intensified after the Greek government brought forward a presidential vote to next week. Greek stocks experienced their steepest fall in more than a quarter of a century as a result.

Some significant economic releases within the Eurozone today will be centred on the ECB’s announcement of the Targeted LTRO at 10:15am, or in other words, the amount of finance the central bank provides to Eurozone banks.

USD

The US Dollar fell for a second consecutive day against its major peers on Wednesday, with the US Dollar index declining by 0.25% in a day where data releases were scarce across the pond.

Mortgage applications rose by 7.3% for the week ending 5th December, its greatest weekly climb in six weeks while Crude Oil stocks increased by 1.454 million in the same time period. Both are very volatile figures, and thus the market reaction was muted. Away from the major releases, a CNBC survey on Wednesday showed that investor confidence in the world’s largest economy appears to be on the rise. More than 50% of wealthy investors believe the economy will be stronger one year from now, up 9% from six months ago.

Traders in the US will today be focusing on the announcement of retail sales data as well as more jobless claims data, both at 1:30pm GMT.

Rest of the world

Russia’s economy seems to be edging closer to an interest rate hike with bonds having now fallen by more in December than any full month since 2009. Norway’s Krone dropped by 0.8% to a five year low against the Euro as traders awaited an expected cut to the growth forecast. Elsewhere, consumer prices in China fell to a five year low in November. The annual reading of 1.4% was well below market expectations and down by 0.2% month on month.

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Written by Claire Hogarth

Marketing Executive at Ebury. English Literature graduate from the University of York and a motivated professional.