Fundamental Headlines
• Data Hit Hopeful Notes for Economy– Wall Street Journal
• Australia Holds Rates Steady – Wall Street Journal
• Obama looks to target overseas tax breaks- Financial Times
• BP Predicts Slow, Gradual Recovery After Profit Misses Analysts' Estimates – Bloomberg
• Stocks Rise as Commodities Rally; Australian Dollar Falls on Rate Surprise- Bloomberg
EUR/USD – Euro-zone producer prices rose 0.1% in December pushing the annualized rate to -2.9% from -4.4%. Economist were expecting factory gate prices to remain flat on the month as energy prices fell 0.2%. Capital and durable consumer goods rising 0.1% led to the upside surprise and warns of future inflation. Meanwhile, German retail sales rose 0.8% in December as a 3.4% rise in apparel sales offset weakness in furniture and automobiles. The end of the recession has started to spur optimism which has led to gains in consumer consumption in three of the last four months. Improving domestic growth and rising prices will put the ECB on alert but policy makers are expected to leaves rates on hold at Thursday’s rate decision. Inflation and growth risks continue to remain balanced and until there is a tip of the scale expect record low interest rates to continue. To discuss this and other topics, please visit the EUR/USD Forum.
GBP/USD – The U.K. construction purchaser’s manger’s index rose to 48.6 from 47.1, which was the slowest pace of contraction in the last two years. A reading above 50 would signal expansion in the sector that was crushed by the credit crisis and collapsing housing market. However, December saw mortgage approvals fall for the first time in a year which could be a sign that absent government stimulus downside risks remain. Therefore, we could see the BoE leave the door open for more quantitative easing despite markets expectations that they will officially bring an end to their asset purchase program at Thursday policy meeting. To discuss this and other topics, please visit the GBP/USD Forum.
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