Intraday Market Thoughts

Euro Regains 1.38, UK Trade Balance in Focus

by Kyle Morrison
Oct 13, 2011 8:40

UK Trade balance seen edging lower, German CPI data to remain subdued, Aussie employment double expectations, gains in September, China trade surplus increases by less than expected, US Trade deficit expected to rise. Today's Premium Intermarket Insights are due before the US open.

Yesterdays sharp rise in UK unemployment to a 17 year high, continues to point towards a bumpy ride for the UK economy over the next few months. With the Bank of England chief economist Spencer Dale warning of lower than expected growth for some time to come due to the problems in Europe, this mornings publication of the August trade numbers are unlikely to offer much in the way of comfort. Expectations are for slight improvement to the visible -8.8bn from -8.9bn in July, while the total trade balance is set to improve to -4.25bn from -4.45bn.

The main focus in Europe this morning is likely to be German CPI data for September which is likely to show that inflationary pressures are overstated. With concerns about growth in Europes largest economy increasing the expectation is that CPI will remain at 2.6% year on year, equating to a 0.1% rise month on month. Such a low figure raises the prospects of an ECB rate cut before the end of this year.

The G20 finance meeting in Paris is due to start today with Slovakia set to ratify the EFSF in the next couple of days the European debt crisis looks set to have overcome one more obstacle as markets absorb Barrossos bank comments yesterday. The G20 meeting involving these nations leaders will take place in Cannes next month.

In Australia the September employment data showed that the Australian economy still appears to be ticking along nicely with the unemployment rate slipping back from 5.3% to 5.2% while the number of people in work rose by 10.8k, slightly above expectations despite the slight slowdown manifesting itself in China, as well as the rest of the global economy.

In China the trade balance for September came in at a surplus of $14.51bn in contrast to Augusts surplus of $17.76bn, and well over half of Julys figure of $31.7bn. This was below expectations of $16.7bn with exports down from a year earlier, up by 17.1%, while imports also only grew by 20.9%, down from analyst expectations of a 23.7% increase. These figures appear to reflect the economic turmoil in two of its key export markets in the US and Europe, as well as the recent tightening in monetary policy.

China also revealed for the first time ever the size of its copper inventories, which came in well above the estimates of most analysts in the market. This suggests that while Chinese demand is likely to remain high they may not need as much copper for import as people think they will, which could temper any gains going forward and weigh on the upside.

In the US the latest August trade balance data is due out and expected to come in higher, along with the latest weekly jobless claims figures.


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