UK growth forecasts downgraded as Cyprus seek Russian aid

Tom Tong21/Μαρ/2013Currency Updates


Yesterday, there was a spate of Macro economic data released in the UK. The Claimant Count Change released by the ONS highlighted that the number of unemployed people increased by 1.5K. This marginal increase did not seem to create any effect in price due to the outcome of the BOE minutes overshadowing the release.

The BoE projected a hawkish tone this time around as the central bank warned that the depreciation in the British Pound may dampen the MPC’s credibility on inflation. It seems as though the majority of members are slowly moving away from the easing cycle as the committee sees above-target inflation over the next three-years. At the same time, the BoE warned that more quantitative easing may trigger an ‘unwarranted’ drop in the exchange rate. Accordingly the minutes showed there was a vote of 6 -3 against further QE.

Meanwhile, Chancellor Osborne said the BoE’s asset purchase program will remain in place for years to come as the government now sees the U.K. expanding a mere 0.6% in 2013 versus an initial forecast for a 1.2% rise. On the back of this forecast cut the Chancellor maintained his support for the central bank’s inflation-targeting framework and endorsed new measures to tackle the deficit and growth. Today, Public Sector Net Borrowing and Retail Sales (YoY) are due.


The Euro jumped for the first time during the week as the ECB stated it will flood liquidity into the Cypriot financial system, but the recent threat of default may continue to effect on the exchange rate as the EU maintains a reactionary approach in addressing the debt crisis. The Cypriot Finance Minister spent the day in Russia lobbying for a loan to appease the ECB, but struggled to gain commitment from the Russians. The Cypriot church also stepped in to offer their vast property portfolio as collateral for any loans.

Yesterday, German PPI (YoY) was lower than expected printing 1.2% from the 1.5% consensus and a previous 1.7%. They also issued a 10-Year Bond with yields lowering by 0.3% with Consumer Confidence in the Eurozone dropping from 23.6 and previous 23.3

We expect a busy day of data being releases in The European Union: Markit Manufacturing PMI, Markit PMI Composite and Markit Services PMI. The two largest economies in Europe Germany and France will release: Markit Manufacturing PMI and Markit Services PMI.


The dollar remained lower against the euro after the Federal Reserve signalled gains in employment aren’t yet sufficient for policy makers to move closer to reducing stimulus measures, allowing the Nasdaq 100 and Dow Jones 30 to increase an average of 0.55%.

The Fed said the nation’s unemployment rate will hit the central bank’s threshold for raising interest rates sometime in 2015. The Fed under Chairman Ben S. Bernanke will continue buying $85 billion of bond per month as it seeks to reduce the unemployment rate that hasn’t fallen below 7 percent since November 2008. The US housing market continues to rebound as used home sales figures reached highs not seen since the crash.

Today, three meaningful indicators will be released after the Fed minutes from yesterday: The Housing Price Index (MoM) with a consensus 0.60% and previous 0.70%. Initial Jobless Claims, which market is expecting to drop at 332K after its previous 342K and the Philadelphia Fed Manufacturing Survey which is expected to improve to -12.5 after its previous -2.


Written by Tom Tong

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