Quiet Market Ahead of Crucial UK Reports

Amid a lack of important global economic releases and following signs of easing geopolitical tensions, tomorrow’s crucial macro data from key global economies is keenly awaited. At home, market participants will scrutinise tomorrow’s wage growth report, as subdued growth and inflation have put a lid on the expectations of a near term hike in interest rates by the BoE. Additionally, the BoE inflation report will be eyed for any revisions to the nation’s inflation and GDP outlook. With last week’s Italian GDP growth numbers disappointing markets, Euro zone’s second quarter growth data later in the week is keenly awaited. Meanwhile, today’s German ZEW sentiment report, along with the US NFIB small business optimism survey and monthly budget statement, will attract market attention.

Pound Sterling – UK Markets

Crucial labour market data, along with the BoE inflation report and the Governor’s speech tomorrow, are likely to take centre stage. Investors will keenly monitor labour market indicators as any improvement in the domestic labour market, especially wage growth, is likely to heighten expectations for a sooner than expected interest rate hike. Additionally, the quarterly inflation report will be scrutinised for hints on the expected path of monetary policy and for signs of debate between policymakers. Markets will also pay close attention to any revisions to the inflation and GDP outlook by the BoE. This morning, the Pound is trading in a tight range against the majors as investors preferred to remain on the sidelines ahead of key UK releases tomorrow. With no major economic releases at home and the US yesterday, the Pound traded in a tight range against the US Dollar. Meanwhile, data released by the British Retail Consortium overnight indicated that retail sales in the nation declined for July, weighed down by heavy discounts offered in the food sector.

US Dollar – US Markets

This morning the US Dollar is trading on a firmer footing versus most of its major counterparts. With most key recent macro releases in the US indicating that the nation’s economy is recovering at a steady pace, a better than expected reading in today’s NFIB small business confidence survey is likely to support this perception. This survey has gained considerable importance lately, especially after the US Fed Chair had earlier indicated that small businesses have played a major role in reducing the US unemployment rate over the last few months. Market participants also await the budget statement for July, which is anticipated to show a swing to a deficit. Going forward, markets will keep a close watch on speeches from some Fed officials scheduled tomorrow to monitor their views on the policy stance. Furthermore, domestic retail sales, industrial production data and the Reuters/Michigan consumer confidence report later in the week will help market participants gauge the growth prospects of the world’s largest economy.

Euro – European Markets

Crucial labour market data, along with the BoE quarterly inflation report and the Governor’s speech tomorrow, is likely to take centre stage. Market participants will keenly monitor labour market indicators as any improvement in the domestic labour market, especially wage growth, is likely to heighten expectations for a sooner than expected interest rate hike. Additionally, the quarterly inflation report will be scrutinised for hints on the expected path of monetary policy and for signs of debate between policymakers. Markets will also pay close attention to any revisions to the inflation and GDP outlook by the BoE. This morning, the Pound is trading in a tight range against its major counterparts as investors preferred to remain on the sidelines ahead of key UK releases tomorrow. With no major economic releases at home and the US yesterday, the Pound traded in a tight range against the US Dollar. Meanwhile, data released by the British Retail Consortium overnight indicated that retail sales in the nation declined for July, weighed down by heavy discounts offered in the food sector.

Other Currencies – Highlights

In a quiet trading session yesterday, the Australian Dollar edged lower against the greenback, despite easing geopolitical tensions in Eastern Europe. However, upbeat domestic data released earlier today has led the Australian Dollar to regain some lost ground. This follows sharp losses last week following dismal labour market data in the nation. In releases this morning, Australian business confidence rose to an eleven month high for July, while house prices advanced at a stronger than expected pace for the second quarter. With little on the domestic macro front today, markets will eye tomorrow’s Westpac consumer confidence data for August, for insights on the state of consumer morale. Also, the consumer inflation expectations data for July is scheduled later this week which will help traders ascertain if the inflation remains within the 2-3% target range of the RBA. The latest reading of consumer price inflation had hit the upper end of the range. Today’s trading trends in the Australian Dollar will be determined by changes in risk appetite, influenced by global economic releases and developments on the geopolitical front.