The just released revised UK GDP report has confirmed that the economy continues to grow at a steady pace as witnessed over the past year. With an improving economy, it remains to be seen whether some BoE officials are inclined towards raising interest rates sooner which might be evident in the next week’s BoE minutes. Moreover, investors will keep a close eye on next week’s inflation and housing market reports to gauge the state of recovery in the nation.
Across the Atlantic, today’s Reuters/Michigan consumer morale and industrial production data will gain increased market attention, especially after disappointing US retail sales data. Additionally, investors will continue to evaluate developments in Eastern Europe and the Middle East for further direction.
Pound Sterling – UK Markets
The Pound is trading in a tight range against the US Dollar this morning. The just released revised second quarter GDP report confirmed that the UK economic recovery continues to remain on track, with annual GDP numbers revised upwards. The encouraging data further supports the BoE’s move to hike its 2014 domestic GDP outlook in its quarterly inflation report released earlier this week. However, the BoE Governor has already confounded expectations of a sooner than expected interest rate hike by linking rate hikes with growth in the nation’s wages, which continue to remain subdued. Going forward today, markets will keep a close watch on a slew of economic releases in the US for further direction to risk appetite.
In the coming week, a string of crucial domestic economic releases, especially inflation and housing market data, will keep market participants interested. Additionally, the minutes of the BoE’s latest policy meeting will be keenly watched to gauge any signs of consensus among policymakers over the future policy stance.
US Dollar – US Markets
The greenback lost ground against the Euro in yesterday’s trading session following the release of US initial jobless claims data which showed a higher than expected rise in the number of claimants for jobless benefits. Meanwhile, markets shrugged off comments from the St. Louis Fed President, James Bullard, indicating that the central bank could raise interest rates as soon as the first quarter of next year.
The US Dollar is trading in a tight range against the majors this morning. Among today’s domestic data, industrial production growth for July is anticipated to show a pickup in activity. Despite doubts over consumer-led demand in the US following subdued retail sales numbers released earlier this week, the Reuters/Michigan consumer confidence index for August is expected to move closer towards its pre-recession level. The producer price inflation figures from the US due later today will offer initial signs about the price trends in the economy for July. Additionally, in the light of recent geopolitical tensions in Iraq, markets will keep a tab on further developments to provide direction to the US Dollar.
Euro – European Markets
According to the preliminary GDP reading released yesterday, Euro zone’s economic growth stalled during the second quarter. Furthermore, an unexpected contraction in the German GDP along with a sharp slowdown in France’s annual economic growth further highlighted the fragility of the region’s economy. Apart from the prevalent threats, the ECB, in its monthly report for August, affirmed that geopolitical tensions in Eastern Europe along with weakness in emerging economies were posing a major challenge to the region’s recovery prospects. Yesterday’s data confirmed that the Euro zone consumer price inflation eased for July, in line with the inflation reports from other European nations.
Meanwhile, the Euro is trading higher against the majors this morning. In the absence of important macro releases scheduled today, the Euro will take direction from economic releases in the US scheduled later today. Moreover, next week’s PMI numbers across key European nations for August will be eyed to gauge if the Euro zone economy is rebounding following the weakness seen during the second quarter.
Other Currencies – Highlights
The Aussie Dollar is trading in a tight range against the US Dollar this morning. The Aussie Dollar pair remained supported above the 0.93 level against the US Dollar after data released yesterday showed that US initial jobless claims rose more than expected for the previous week. Meanwhile, domestic data released showed that consumer price inflation expectations eased for July, in response to a drop in energy prices. Investors will eye further macro data to gauge the nation’s economic strength, especially after the Reserve Bank of Australia cut its 2014 GDP growth forecast recently and stated that an underlying weakness in the labour market could remain for some time. Meanwhile, the latest confidence surveys among local businesses and consumers indicated an improvement in domestic sentiment, suggesting that the overall business environment is recovering, especially after tough measures were introduced in the latest budget.
With little on the domestic macro front today, US Reuters/Michigan consumer sentiment data due later today and next week’s RBA minutes could be some major releases to provide further cues to risk appetite.