Germany brings hope to the Eurozone

Yesterday’s markets

27th October 2015

  • German Ifo Business Climate: 108.2
  • US New Home Sales: 468K
  • NZD Trade Balance: -1222M

Yesterday morning we saw some positive data released from Germany as the IFO survey beat expectations despite the VW scandal. However, it was still the first decline in four months and could be a sign of things to come. Whilst the German economy is proving to be "very resilient" it doesn’t take away from the dovish tone of the ECB last week the figures did little to reverse the losses from last week. The single currency remains on the back foot and we now expect the ECB to announce an extension of the Bank’s QE programme at the December meeting along with a small cut to the deposit rate.

Meanwhile data from the UK was fairly weak and could signal some potential problems in the future. The CBI Industrial Trends was releases which showed that optimism and orders dropped significantly. New orders are at their lowest since June 2013 and export orders at the lowest since 2009 which is largely to do with the strong currency. In addition, the mortgage approval numbers from British banks fell to its lowest number since May.

The Dollar retreated in the afternoon as the new homes sales numbers disappointed. New U.S. single-family home sales fell to near a one-year low in September after two straight months of gains. New home sales account for 7.8 percent of the housing market but only adds to the cooling run of data we have seen of late. The focus of US price action will be centralized on Wednesday with the release of the FOMC rate decision and statement. 

Today’s markets

26th October 2015

  • EUR M3 Money Supply y/y
  • UK Prelim GDP q/q
  • US Core Durable Goods Orders m/m
  • US Durable Goods Orders m/m
  • US CB Consumer Confidence
  • AUD CPI q/q

Much has been made of the slightly dovish UK economic numbers of late, today we see what impact that has had of the growth of the economy in Q3. We are expecting growth to have slowed by 0.1% to a rate of 0.6%. Meanwhile there are some key economic readings from the US in the form of the durable goods and consumer confidence.