The 45-Minute Salvo

Yesterday, within a span of 45 minutes, major central bankers stepped up efforts to guard their ailing economies. The Bank of England increased its asset purchases by £50 billion, while the European Central Bank and the People’s Bank of China cut their benchmark interest rates, supporting the recent batch of weak economic releases. Additionally, the ECB President warned of risks facing the Eurozone economy, leading Sterling to post decent gains against the Euro. Across the Atlantic, following yesterday’s strong ADP employment and jobless claims reports, markets keenly await the non-farm payrolls data due later today that is expected to be largely positive.

Pound Sterling – UK Markets

The much expected stimulus expansion came into fruition, as the BoE pumped in an additional £50 billion into the nation’s economy while retaining the interest rate at 0.5%. The move was backed by a raft of dismal macro releases in the recent past and the central bank Governor, Mervyn King’s concerns over the worsening economic conditions. Meanwhile, a rate cut by the ECB and warnings over risks facing the Eurozone economy led Sterling to move above the 1.25 mark against the Euro. However, the current session has seen the Pound trading in a narrow range against the majors. Data just out revealed that the annual output producer price index grew at a slower pace for June. Developments in the Eurozone and across the Atlantic are likely to influence the movement in Sterling against the majors today. Meanwhile, the week ahead features industrial production, manufacturing production and trade balance data. However, the NIESR’s GDP estimate is expected to garner increased market attention for further insights on the dwindling UK economy.

US Dollar – US Markets

A string of monetary easing actions by major central banks yesterday highlights the dire state of the global economy and spurred demand of the US Dollar as a safe haven currency. On the domestic macro front, buoyant ADP employment and initial jobless claims data eased concerns over the otherwise weak labour market. However, the ISM revealed deterioration in the US services sector for June and raised concerns over the strength of the economy. In today’s trading session, the US Dollar is trading in a tight range against both the Pound and the Euro ahead of the release of the crucial non-farm payrolls later today, which is expected to show a faster pace of jobs addition for June and is expected to keep a tight lid on QE3 chatters. Meanwhile, unemployment is expected to remain unchanged at 8.2% for June. The minutes of the Federal Reserve’s latest monetary policy meeting, coupled with the Reuters/Michigan consumer sentiment index, will be closely tracked by investors in the forthcoming week.

Euro – European Markets

In the previous trading session, the Euro moved below the 1.24 mark against the US Dollar after the ECB decided to slash the key interest rate to a record low of 0.75%. The move was widely in conjunction with the measures taken at the EU Summit last week to revive the region’s economy. The ECB President, Mario Draghi, justified the move as he affirmed that the region’s debt crisis had led to an overall economic slowdown. Adding to the woes, the Spanish bond yields surged to the pre-EU Summit level. This morning the Euro is trading range bound against its major peers ahead of German industrial production data later today, which is expected to show an annual decline for May. Data just out revealed that the French trade deficit narrowed for May. With no other significant economic releases slated for today, news flow from the region is set to be closely watched. The next week seems light on the macro front with the German consumer price inflation and the Ecofin meeting featuring as the major events.

Other Currencies – Highlights

The Kiwi Dollar has weakened against the US Dollar this morning as monetary easing actions in Europe and China intensified concerns over the global economic outlook. Data indicating a narrower than expected budget deficit in New Zealand for May on account of higher tax revenues had little impact on the Kiwi Dollar against the majors. However Bill English, the nation’s finance minister, warned that the uncertain economic environment would result in frequent tax fluctuations. Meanwhile, the New Zealand Prime Minister, John Key, cautioned that the nation’s economy is still feeling the heat of earthquakes and recession and requires more investment from Australia, one of its largest trading partners. News flow emanating from the Eurozone and US non-farm payrolls data are likely to set the risk tone for today’s trading session.