Looking at the latest UK news the index of production in the UK has risen to 0.5 in the last Q of 2013 just below the 0.7% rise many analysts forecast. Manufacturing has risen sharply in the period temporarily defying those who continually suggested that the UK’s economic growth is unbalanced. In other UK news that trade balance shrunk in December to a figure of one million. The strongest exports were in aircraft, oil and chemicals.
Finally in the UK, the NIESR think tank in the UK, are predicting that the UK’s GDP for 2014 to 2.5% from the previous calculation of 2% whilst they also believe that the UK’s unemployment level will finally fall to 7% this year.
German exports fell 0.2% in in 2013 versus 2012, the surplus for 2013 was a healthy €190 billion, the highest was €195 billion in 2007 therefore the gap is begging to close. In other German related news a high impact new event that has been mumbling in the background which very few analysts have commented on other than FXCC has been the German constitutional court’s opinion on the legality of the ECB’s outright market transaction programme. A programme that many lawmakers in Germany believe is QE by any other name, and should be strictly outlawed under the ECB’s remit. In breaking news this morning the court has ruled that the matter should be referred to the European court. As to whether this is passing the buck (or euro), or escalating the complaint remains to be seen.
And so it wouldn’t be NFP day if we didn’t offer up our advice on what to do (and what not to do) if you’ve decided to trade the news event. DON’T TRADE THE NEWS TRADE THE REACTION TO THE NEWS. Wait until the first 10-15 candles after the news has broken to form then enter in the direction and look for a reasonable pip return based on sensible risk limits. Try and get in when the news breaks and the spreads will widen, the fills will be difficult and getting out of the market could prove problematic.
UK Index of Production, December 2013
Production output rose by 0.5% between Q3 2013 and Q4 2013. The preliminary estimate of GDP, published on 28 January 2014, contained a forecasted rise of 0.7% for production in Q4 2013. This release of data estimates that production rose by 0.5% between Q3 2013 and Q4 2013 but the impact on the previously published Q4 2013 GDP estimate is less than 0.05%. By far the largest contribution to the quarterly growth in production came from manufacturing, which increased by 0.7%. Looking at the broader picture, total production output was 1.8% higher in December 2013 compared with December 2012; reflecting a 1.5% rise in manufacturing.
UK Trade, December 2013
Seasonally adjusted, the UK’s deficit on trade in goods and services was estimated to have been £1.0 billion in December 2013, compared with a deficit of £3.6 billion in November 2013. There was a deficit of £7.7 billion on goods, partly offset by an estimated surplus of £6.7 billion on services. The narrowing of the total trade deficit reflects both an increase in exports (2.1%) and a fall in imports (3.8%). By commodity, the strongest exports were in oil, chemicals and aircraft. The largest falls in imports were in aircraft and ships. The goods deficit in countries outside the EU has narrowed in each of the last six months.
U.K. Outlook Raised by NIESR as Consumer Spending Lifts Growth
The U.K. economy will grow faster than previously forecast as rising house prices support consumer spending, the National Institute of Economic and Social Research said in a report today. Gross domestic product will expand 2.5 percent this year, more than the 2 percent the London-based group forecast in November. The unemployment rate will reach the 7 percent threshold for the Bank of England to consider an interest-rate increase in early 2014, it said, revising an earlier assessment there was a one-in-five chance of that happening in the first quarter.
German exports in 2013: –0.2% on 2012
Germany exported goods to the value of 1,093.9 billion euros and imported goods to the value of 895.0 billion euros in 2013. Based on provisional data, the Federal Statistical Office (Destatis) also reports that German exports decreased by 0.2% and imports by 1.2% on 2012. The foreign trade balance showed a surplus of 198.9 billion euros in 2013. This was the highest value recorded since the beginning of compiling foreign trade statistics. In 2012, the surplus of the foreign trade balance had amounted to 189.8 billion euros. The highest export surplus recorded so far was 195.3 billion euros in 2007.
German judges refer ECB’s OMT to European Court
Germany’s Constitutional Court said on Friday it had decided to refer a complaint against the European Central Bank’s (ECB) “unlimited” bond-buying programme to the European Court. The ECB’s Outright Monetary Transactions (OMT) programme, announced by ECB chief Mario Draghi in September 2012 at the height of the sovereign debt crisis, is widely credited with stabilising the euro.
Market overview
The ASX 200 closed up 0.68%, CSI 300 up 0.46%, Hang Seng up 1.00%, Nikkei up 2.17%. In Europe the majority of the main bourses have opened up mixed; STOXX 0.09%, CAC down 0.03%, DAX up 0.03% FTSE up 0.07%. Looking towards the New York open the DJIA equity index future is up 0.12%, SPX future is up 0.11%, NASDAQ up 0.25%.
NYMEX WTI oil is down 0.27% at $97.53 per barrel with nat gas on NYMEX up 0.49% at $4.96 per therm. COMEX gold is up 0.39% at $1262.00 with silver down 0.22% at $29.88 per ounce.
Forex focus
The dollar traded at 102.18 yen early in London, after rising 0.7 percent to 102.11 yesterday. Japan’s currency was little changed at 138.84 per euro. Europe’s 18-nation currency was at $1.3588 after gaining 0.4 percent, the most since Jan. 23rd, to $1.3590. The dollar held a gain versus the yen before U.S. data that may show jobs growth quickened last month from the slowest pace in almost three years, fanning speculation the Federal Reserve will end asset purchases this year.
The U.K. currency strengthened 0.2 percent to 83.14 pence per euro early London time after dropping 0.6 percent during the previous two days. The pound advanced 0.1 percent to $1.6344 after dropping to $1.6252 on Feb. 5th, the lowest level since Jan. 17th. The pound advanced, snapping a two-day decline against the euro, before a government report that economists said will show U.K. industrial production increased in December.
The Aussie fell 0.3 percent to 89.35 U.S. cents late in Sydney after rising as much as 0.2 percent. It’s up 2 percent this week, set for the biggest advance since the period through Oct. 18th. New Zealand’s currency lost 0.3 percent to 82.25 U.S. cents and has strengthened 1.7 percent since Jan. 31st, poised for its largest weekly gain since the five days ended Dec. 6th. The Australian dollar fell, reversing earlier gains, amid prospects the U.S. Federal Reserve will press on with a reduction in stimulus before a report that may show job growth accelerated from the slowest pace in almost three years.
Bonds briefing
The U.S. 10-year yield was at 2.70 percent early in the London session. The price of the 2.75 percent note maturing in November 2023 was 100 14/32. The yield has climbed five basis points, or 0.05 percentage points, this week. Treasury 10-year notes headed for their first weekly decline this year on speculation a jobs report today will encourage the Federal Reserve to keep reducing its bond purchases.
Investors have shifted record amounts out of U.S. stock funds and into bonds, while withdrawing money from emerging-market equities for a 15th straight week, U.S. equity funds had $24 billion of outflows in the week to Feb. 5th, according to a report today from the research unit of the third-largest U.S. bank. Withdrawals from stock funds worldwide totalled $28.3 billion.
