Morning report 08/10/2015

The euro and the Canadian dollar ended the day lower vs the dollar yesterday. The British pound, Australian dollar and New Zealand dollar traded higher throughout the day.

As expected, the Bank of Japan left its key interest rate range at zero to 0.1 percentage. It said it would continue to buy JGBs (Japanese government bonds) at an annual pace of 80 trillon yen. The vote to maintain its policy was 8 to 1.

In its statement, the monetary policy board said that the economy continued to recover moderately and was likely to continue doing so. The MPB said that the core CPI was likely to continue to be about zero for now due to the decline in energy prices. However, both exports and output have been affected by the slowdown in the emerging markets. It noted that private consumption has been resilient but capex remains weak.

In Germany Industrial production was weaker than expected in August. A 1.2 percent monthly fall exactly an upwardly revised gain in July. The monthly headline decline reflected worrying losses in capital goods output was down 2.1 percent, consumer goods 0.4 percent and intermediates were only flat. Energy decreased 1.4 percent and construction was off 1.3 percent As such, the likelihood is that goods production has at best has a limited boost to real GDP in July-September points of a disappointingly sluggish increase in whole economy output. The euro traded lower after this data realise.

In the UK the goods producing sector had a positive August. A 1.0 percent increase in output versus July (revised to -0.3 percent) was much stronger than market expectations and the largest rise since May. Annual growth improved from 0.7 percent to 1.9 percent. It was also a decent period for manufacturing where output was up 0.5 percent on the. Compared with a year ago the sector’s production was still down 0.8 percent but even this constituted a market improvement from July’s steeper revised 1.2 percent contraction. Within overall manufacturing six of the thirteen reporting subsectors posted monthly rises in output. The best performer was transport equipment which climbed 4.6 percent and alone contributed 0.4 percentage points to the change in industrial production. Metals products, which added 0.2 percentage points, also fared disproportionately well. On the downside manufacturing and repair fell 2.0 percent.

The big events to watch today are the Bank of england announcement and minutes we also have the minutes realised from the ECB.

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