UK Shows Further Signs of Growth

Although Chinese manufacturing data continues to highlight the fragile state of the world’s second largest economy, the Euro temporarily received a boost following today’s encouraging manufacturing data from most of the Euro zone nations. The Euro zone unemployment and the ISM manufacturing data from the US could sway market sentiment in today’s session. Additionally the US non-farm payrolls due for release this week will offer further hints on the probability of the Fed tapering its QE3 programme going forward. In the UK, fresh evidence of the nation treading a path to recovery emerged following encouraging manufacturing and mortgage approvals data. Meanwhile, Mark Carney is set to take charge as the BoE Governor today.

Pound Sterling – UK Markets

The Pound has nudged higher against the US Dollar and is trading above the 1.52 mark in today’s trading session following upbeat set of economic releases. Reports released just now have revealed that the manufacturing barometer of the UK economy witnessed a more than expected expansion for June. Additionally, data from the BoE showed that mortgage approvals surpassed market expectations for May, in line with BBA report released last week. Meanwhile, today marks the first day in office for the newly appointed BoE Governor, Mark Carney. Market participants are likely to keep a close eye on this week’s monetary policy meeting for gauging the stance that the newly appointed Governor adopts. Construction and services PMI data due in the next two trading sessions will also be keenly eyed for further insights into the performance of the UK economy in the second quarter of 2013. With little in store in terms of domestic news today, the Euro zone unemployment and the US manufacturing data will hold prominence for determining the near term direction in Sterling against the majors.

US Dollar – US Markets

On Friday, the US Dollar moved higher against its major peers amid persistent speculation that the central bank might soon begin scaling back its unprecedented stimulus measures. The comments from the US Fed Governor, Jeremy Stein, suggested that the Fed might start tapering its QE3 programme in September 2013. The Reuters/Michigan consumer sentiment report released on Friday also painted a bright picture of the economy. However, Friday’s Chicago manufacturing report dented hopes that the nation’s manufacturing sector is showing signs of revival, as manufacturing activity in the region grew at a slower than anticipated pace for June. Against the backdrop, non-farm payrolls, manufacturing and services PMI data in the US due this week will be keenly gauged for further evidence of the nation picking up steam. Despite weak manufacturing PMI data from China, a recovery in risk appetite among traders was observed following upbeat manufacturing PMI releases across most of the European nations. Going forward today, market focus will turn towards the ISM manufacturing PMI data to ascertain whether the manufacturing sector managed to register a recovery for June..

Euro – European Markets

“Risk on” sentiment following fairly resilient manufacturing PMI releases across major European economies has arrested the decline in single currency against the US Dollar in today’s trading session. However, traders will keep an eye on the Euro zone unemployment report later today to ascertain whether the labour market showed any signs of improvement for May. Apart from the employment report, the Euro zone consumer price index due later today also remains a key event on traders’ radar. With Friday’s German consumer price inflation revealing an acceleration for June, today’s data will be keenly eyed to gauge inflationary pressures in the region. However, with inflation hovering well below the central bank’s target rate and unemployment woes showing no signs of abating, the ECB’s monetary policy meeting due later this week will garner market attention for decoding the central bank’s future policy moves. Meanwhile, in a noteworthy development, S&P and Fitch have demoted their credit rating on Cyprus following the Cypriot government’s decision to exchange €1 billion government bonds for longer dated maturities.

Other Currencies – Highlights

The Australian Dollar has advanced against its US counterpart in today’s trading session after data released earlier today revealed that manufacturing activity in Australia improved substantially for June. A pickup in the nation’s economic activity could result in the Reserve Bank of Australia maintaining status quo in its policy meeting scheduled tomorrow. Meanwhile, market participants have seemingly shrugged off a dismal manufacturing report from China. Apart from the central bank meeting, a raft of domestic releases including services PMI, retail sales and trade balance data due this week will be gauged to ascertain the pace of recovery across different sectors. Additionally, news flows emanating from both sides of the Atlantic will have a bearing on the near term dynamics of the Australian Dollar against the majors.