A wild ride for the Russian Rouble overnight with the currency swinging wildly throughout the course of European and North American trade. Having opened at 60.907 to the USD, a sharp appreciation on the 65.8975 closing level of Monday, the currency slid to 79.9125 midway through the European session before clawing its way back to 67.815, something that coincided with a recovery in crude prices. Putting the move into perspective the overnight range was the largest in history and was the fourth-largest intraday percentage range since 1996, superseded only by three dates during the currency crisis of September 1998.

US housing starts and building permits both declined in November. Starts fell by 1.6% to an annual pace of 1.028m, down from the 1.045m rate of October, with permits, a forward indicator on future activity, dipping by 5.2% to 1.035m. Markets had been looking for annualised rates of 1.04m and 1.06m respectively.

US manufacturing sector growth slowed to an 11-month low in December with Markit’s flash PMI gauge slipping to 53.7. The reading, below the 54.8 level of November and expectations for an increase to 55.2, was the lowest level seen since January 2014.

Eurozone private-sector business activity accelerated slightly in December with Markit’s flash composite PMI gauge rising to 51.7. The reading was higher than the 51.1 level of November and expectations for an increase to 51.5 with manufacturing and services, up to 50.8 and 51.9 respectively, both improving for the month. While a reasonable headline print, at least compared to recent times, there was further evidence that deflationary pressures are building with the gauge measuring output prices coming in at 48.0. The figure, up from 47.6 in November, was the 33rd consecutive month that a contraction has been recorded. From a national perspective it was a mixed picture with a rebound in German manufacturing activity offsetting another worrying decline in France whilst for services a sharp increase in France, albeit still in contractionary territory, offset a slowdown in Germany.

Germany: Manufacturing 51.2 (Nov 49.5, Exp 50.4)

Services: 51.4 (Nov 52.1, Exp 52.5 – 17-month low)

France: Manufacturing 47.9 (Nov 48.4, Exp 48.6 – 4-month low)

Services: 49.8 (Nov 47.9, Exp 48.3 – 4-month high)

The Eurozone trade surplus swelled to €24.0b in October, the highest level on record. The figure was above the downwardly-revised €18.1b surplus of September and expectations for an increase to €19.6 with exports, up 4% on month to €179.6b, outpacing a small rise in imports to €155.6b.

German investor sentiment surged in December with the ZEW expectations index jumping to 34.9. The reading, higher than the 11.5 level of November and expectations for an increase to 20.0, was the largest month-on-month points gain since January 2013. Not only did the gain leave the index at levels last seen in April but also snapped a 12-month consecutive decline that began in December 2013. Mirroring the surge in expectations the current conditions index rose to 10 from 3.3 in November, the first time an increase has been recorded since June.

UK consumer prices plummeted by 0.3% in November. The reading, below even the most pessimistic forecast, was well below the 0.1% increase of October and expectations for no change overall. As a result of the monthly decline the annualised rate fell to 1.0%, the lowest level seen since September 2002. While CPI slid it was a different story for industrial prices with an increase of 0.2% reported. The reading was higher than the 0.3% decline of October, also the same level eyed for December, and took the annual rate back to -0.1%, the slowest pace of deflation since July. Adding to to the intrigue core producer prices, that which excludes volatile items such as energy, rose by 1.4% on year, the fastest annual growth since April 2012.

UK house prices increased by 0.1% in October leaving the annual growth rate at +10.4%, down from +12.1% in September. From a year earlier prices in London, the Southeast and East increased by 17.2%, 11.9% and 9.6% respectively with prices elsewhere rising by a more modest 6.7%.

The Bank of England released their semi-annual financial stability report overnight. To read the document in full click here.


The Day Ahead (AEDT)

The ASX 200 looks set to extend it’s losses this morning with SPI futures pointing to a fall of 17pts on the open. While the index is due a bounce, it’s fallen for 6-consecutive sessions, the equal-longest run since mid-2010, with markets increasingly skittish about Russia, Greece, oil and the FOMC this evening, it’s anyone’s guess whether the index will finish higher or lower today. Key support remains 5122, options and futures expire arrives tomorrow.

Having briefly squeezed up to .8274 in European trade the AUDUSD has found itself back under pressure this morning with the pair currently fetching .8218. While trade is likely to remain volatile up until the FOMC policy decision tomorrow morning, it’s likely that the pair will stick to familiar ranges today. Support is located at .8200 with resistance layered at .8240, .8260 and the overnight high of .8274.

The FOMC December policy announcement will be released tomorrow morning at 6am. All attention will be on the wording of the statement, particularly whether they drop the ‘considerable time’ line when it comes to normalising policy, along with the fabled dot chart which details FOMC member forecasts for movements in the Fed funds rate. Adding spice to this decision Janet Yellen, FOMC Chair, will also hold a media conference shortly after the statement and projection materials have been released. While it will be a close call whether the Fed decide to drop their reference to keeping rates steady for a considerable time, given external inflationary pressures are diminishing rather than accelerating and the fact that wage inflation remains low despite the pickup in November, I lean towards the likelihood that they will remain cautious despite obvious improvements within the domestic economy.   

The Greek Parliament Presidential vote occurs this evening. 200 of 300 members need to agree to the appointment in order for it proceed. If the vote fails the Parliament has two further chances to make the decision later this month, the latter only requiring 180 votes, with a failure to find an agreement a trigger for a snap general election.

Regional data releases today include trade figures from Japan, Singapore non-oil exports, New Zealand current account and South Korean PPI. Later in the session we’ll also receive CPI and the latest MBA mortgage market index from the States, inflation and labour costs from the Eurozone along with unemployment and the minutes of the Bank of England’s MPC meeting for December.


Market Map Dec 17 2014
















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