Market Drivers for October 24 2014

UK GDP in in line creating relief rally in cable

EUR GFK Consumer confidence improves

Nikkei 1.01% Europe -0.09%

Oil $81/bbl

Gold $1232/oz.

Europe and Asia:

NZD Trade Balance -1350M vs. -620M

EUR GE GFK 8.5 vs. 8.1

GBP UK GDP 0.7% vs. 0.7%

North America:

USD New Homes 10:00

Currencies were generally rangebound on the last trading day of the week with cable finding a modicum of relief rally after UK GDP data printed in line with expectations. Earlier in Asian session trade markets came in for a bit of risk aversion selling when it was confirmed that a doctor who had been fighting Ebola in West Africa had come down with the virus upon his return to New York and was rushed to Bellevue Hospital.

The first case of Ebola in the New York metropolitan region raised concerns that the disease could spread in a densely populated area but unless there are more cases reported in New York in the next few weeks the Ebola story is likely to diminish in its impact on the markets. Of course the nightmare scenario for investors and the public at large would be in Ebola mutates and becomes airborne or even becomes easily transmittable through touch. For now however there is no evidence that the virus spreads any other way but through bodily fluids and therefore the Ebola story is likely to remain a background risk to the market.

On the economic front the UK GDP figures printed at 0.7% as expected and cable staged a mild relief rally as some traders feared that the recent slowdown in activity could translate into lower growth figures. The preliminary data showed that production rose by 0.5% versus 0.2% the period prior but services slowed to 0.7% from 1.1%.

The slowdown in activity reflects the tepid demand conditions in EZ as whole, but on that front there was some positive news as GFK Consumer data out of Germany showed an uptick rising to 8.5 from 8.1 expected. The latest data from Europe indicates that conditions have stabilized and may actually improve into the year end as the shock of geopolitical tensions with Russia begins to wane.

For now however there is nothing in the UK data to indicate that BOE is about to shift its policy stance and that means that cable will remain rangebound for the time being. The pair traded to a high of 1.6070 in the wake of the announcement but then retraced back to 1.6030 as it continues to consolidate above the 1,6000 figure.

In North America today the only economic release on the docket is New Home sales with markets looking for a pullback to 473k from 504K the month prior, but given the low rate environment there is potential for upside surprise. If the numbers do print better than expected USD/JPY could make another run at the 108.50 level, but the pair remains vulnerable to any fresh news of Ebola infection and could quickly reverse on risk aversion flows.

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