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The Marketplace - January 30th 2015
30/01/2015
Good morning,
The Euro is still the main focus as Greece continues to negotiate its terms within the Eurozone. Poor housing sales in the US caused the Dollar to soften against the Euro yesterday and the Pound wilted even though the CBI release was above expectation. Expect to see some strange moves today as we have key releases – Also, the end of month trader profit-taking which can cause a stir in the markets.
UK Data Shows Pickup in Household Incomes
The CBI retail survey and European Commission consumer confidence survey for the UK provide further signs of the pickup in household real incomes – as wage growth picks up and inflation falls – and resultant solid growth in spending.
The EC survey shows little change in their consumer confidence index for January (which uses the Gfk data in seasonally adjusted form) but the latest figure is 1.4 standard deviations above the average of 1985-2014. Within the components, the series for the change in households’ financial position over the last year is the best since 2008, with particularly sharp improvements in the second and third income quartiles (i.e. the middle 50% of the income distribution), and among people working full-time. The “feel-better” factor is back.
There is also a further rise in the forward-looking reading covering households’ expectations for their own finances in the year ahead (although these remains just below levels seen in April/May last year). With the combination of rising real wages and record low fixed mortgage rates, the quarterly series on the share of people that intend to buy (or build) a house rose in January to the highest since 2003.
UK retail sales volumes fell less than expected in January, easing concerns over the health of the country's economy .In a report released yesterday, the Confederation of British Industry said the result of its index of UK retailers fell by 22.0 points to 39.0 this month from 61.0 in December. Analysts had expected the index to fall by 31.0 points to 30.0 in January.
Greek debt negotiations continue
This week's visit to Athens by the head of the Eurozone finance ministers' group will mark the start of Greece's negotiations on changing the conditions of its international bailout accord, the finance ministry said in a statement. Eurogroup head Jeroen Disselbloem is due to meet new Prime Minister Alexis Tsipras and his Finance Minister Yanis Varoufakis on Friday, kicking off a round of meetings with European partners.
"Negotiations with our partners begin with this visit, which will lead to a viable, comprehensive agreement to reconstruct our social economy," the finance ministry said.
Varoufakis is due to travel to London on Sunday to meet his British counterpart George Osborne as well as investors and then goes to Paris on Monday to meet French Finance Minister Michel Sapin and Economy Minister Emmanuel Macron. He meets Italian Economy Minister Pier Carlo Padoan in Rome on Tuesday. Varoufakis has said he is seeking to win support for a renegotiation of Greek debt and a "bridge" deal to replace the current bailout program.
U.S. Jobless Claims Drop Back
Initial jobless claims fell to 265K during the week ended January 24, well below the 300K estimate. Jobless claims have been quite volatile over the last month. But the volatility largely reflects the difficulty of seasonal factors to account for the gyrations in unadjusted claims at the start of the year when seasonal workers are let go and around the MLK holiday. Beneficiaries, which fell to 2.38M during the week ended January 10 after a few weeks of elevated readings have also been volatile. Analysts anticipate that jobless claims figures will settle down in the weeks to come.
Today’s Key Data:
EUR – CPI Flash Estimate y/y: Expect further decline from -0.2% to -0.5%. Only recently has there been any sign of good news but the overall picture shows actual releases fall below expectation seven times in the last 12 months.
USD – Advance GDP q/q: After the last release, the figure of 3.5% was revised to 5% but this time, analysts are expecting a minor downturn with predictions around 3.5% It may seem a little soft but expect the Dollar to make some significant moves today if the number is higher than the analysts forecast.
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