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Counting the cost of mild winter weather

Counting the cost of mild winter weather

A day of mixed performances for the majors yesterday as the week started with limited volatility due to the lack of any important economic events. The more important news events are expected towards the end of the week hence we should expect more of the same today as the main focus in the market will be on the UK Pound and the release of the Manufacturing and Industrial Production reports and BoE Governor Carney’s speech in Paris. Focus today will be on central bank speakers, as economic data is light on the ground again. The Fed Vice Chair Stanley Fischer could cause further dollar strength if he indicates that the Fed is able to look past the recent market turmoil and continue with the planned path of rate hikes this year.

Mark Carney is also due to speak this afternoon. Investors will keenly eye his comments to gauge the BoE’s confidence in overcoming disinflation which is being imported from the struggling Eurozone, and the effect it will have on raising UK interest rates in 2016.

Just after midnight the British Retail Consortium released December’s Retail Sales Monitor and it showed little improvement on last year at 0.1% growth. Higher consumer confidence was countered by wet weather reducing the footfall on the high streets and mild weather reducing the need for winter clothing upgrades.

Morgan Stanley researchers have reported that a 5% increase in the value of the US Dollar could send Brent Crude Oil prices as low as $20 a barrel. The effect of this would make global inflation levels stubbornly resistant to increases. Low inflation for the Pound, the volatility in the global markets and the recent drop in oil prices are all important factors that usually make policymakers nervous. And that is not a suitable environment to think about raising interest rates hence Cable is probably in for more losses in the medium term.

Data to watch: 9.30 am UK Industrial & Manufacturing Production. 2.15 pm Mark Carney Speech. UK NIESR GDP Estimate (3M).


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