UK Economy Hits a Speed Hump

The latest set of economic releases has tempered the recent optimism over recovery of the British economy. Weak data released today shows that industrial and manufacturing production has declined more than expected for May. Meanwhile, RICS reported that the house price balance climbed to its highest level since January 2010. The focus now turns to the NEISR GDP estimates due later today to define the trend for Sterling against the majors. Meanwhile, Greece secured a multi-billion lifeline from Euro zone finance ministers yesterday, provided the debt laden nation adheres to the terms of the reform target set under the terms of its bailout agreement. The IMF global growth forecasts due later today will grab market attention for insights into global economic prospects.

Pound Sterling – UK Markets

The Pound has erased its early session gains against the majors in today’s morning session following worse-than-expected industrial and manufacturing data, casting doubts over the strength of the recent economic recovery. Data just out has indicated that industrial and manufacturing production in the UK unexpectedly fell more than anticipated for May. Additionally, BRC reported that sales of like for like goods rose at a slower pace for June, despite shop price inflation revealing an easing trend, thereby shifting the focus to the retail sales data due later this month for further clarity on the nation’s retail sector growth. On the flip side, RICS data released overnight revealed that the house price balance in the UK climbed for June to reach its highest level since January 2010, reflecting the success of the FLS scheme jointly undertaken by the British Government and the BoE. Considering the recent weaker-than-expected data, NEISR GDP estimates due later today will be scrutinized to decipher the nation’s second quarter performance. Trading sentiment in the Pound is also likely to be governed by events unfolding in overseas markets in today’s session.

US Dollar – US Markets

The US Dollar lost steam against the Pound and the single currency yesterday as traders preferred to book profits in the safe haven currency. The Euro zone finance ministers’ agreement to disburse the second tranche of bailout aid has also led traders to increase their position in riskier currencies. On the domestic front, consumer credit data further boosted prospects of the nation’s consumer led recovery. Figures showed that Americans increased their borrowing for May at the fastest pace in a year, with borrowing in the category that includes credit cards reaching its highest level since 2010. Meanwhile, with little in store in terms of macro news, markets are expected to pay passing attention to NFIB small optimism index scheduled for release later today. With the labour market reporting steady recovery, today’s data will be gauged to decode whether small businesses are also registering similar buoyancy to that witnessed in the broader economy. Developments overseas could also hold prominence for the greenback’s demand against the majors in today’s session.

Euro – European Markets

Euro zone finance ministers yesterday agreed to disburse €3.0 billion in aid to Greece in two instalments, €2.5 billion in loans this month and a further €500 million in October, provided that the country meets the reform target set under the terms of its international bailout. The single currency nudged higher against its US counterpart yesterday as traders seem to have increased their position in riskier currencies following the agreement. Profit booking following a recent rally in the US Dollar further supported the Euro. Data released yesterday indicated that industrial production in Germany dropped more than anticipated for May, underpinned by weak exports and a slowdown in construction sector, thereby reviving fears that the nation may be succumbing to the pressure of the peripheral economies. With the macro profile providing a grim picture, the ECB Chief yesterday reiterated that the central bank would continue with its accommodative monetary policy stance for the foreseeable future. Despite the gloom, the OECD indicated that the Euro-area economic recovery is gaining momentum. With a light European economic calendar today, global cues should be monitored for further direction to currency markets.

Other Currencies – Highlights

Disappointing retail sales figures has led the Swiss Franc to register losses against the US Dollar and the Euro in today’s trading session. Data showed that on an annual basis, retail sales in Switzerland rose at a lacklustre 1.8% for May, against 3.1% growth reported in April. However, macro data released yesterday provided strong hints that the nation is treading a recovery path. Data released yesterday indicated that the unemployment rate in the nation surprisingly declined for June, while industrial production registered a faster pace of growth for the first quarter of 2013. With most releases out for the week, events unfolding across the globe are likely to act as a catalyst for the near term dynamics of the Swiss Franc during this week. Additionally, the IMF global growth