Markets Take a Breather

Upbeat durable goods orders and consumer confidence reports in the US continues to suggest that the economic recovery in the world’s largest economy remains steady. On the contrary, recovery in the Euro zone has run into the sand as evident by the recent set of dismal macro reports in the region. With a light global economic calendar today, markets will keep a close watch on a slew of macro data from the US and Europe later this week, especially the US revised GDP numbers along with inflation reports from most of the European nations for further cues on their respective future policy stance going forward. With less than four weeks to go until the Scottish referendum on 18 September 2014, majority of the business leaders have urged Scotland to cast a no vote.

Pound Sterling – UK Markets

The Pound dropped against the greenback in yesterday’s trading session following the release of upbeat US consumer confidence report for August. Meanwhile, data released earlier yesterday indicated that the number of mortgage approvals in the UK dropped unexpectedly for July following more stringent lending rules introduced by the BoE in April and despite falling house prices in the nation. Against this backdrop, markets will keep a tab on this week’s housing prices data for further cues on the state of health in the nation’s housing sector. With little on the domestic macroeconomic front today, the Pound is trading in a tight range, albeit on a firmer footing against the majors this morning. Meanwhile, a slew of crucial economic releases in the US and Europe later in the week will grab market attention considering its potential to risk sentiment in the upcoming trading session. Furthermore, debate surrounding Scottish referendum which will be held on 18 September 2014 will keep market participants on their toes.

US Dollar – US Markets

The greenback advanced against the majors yesterday following the release of upbeat US durable goods orders data. Although, orders for long-lasting US manufactured goods increased at its strongest level for July due to a spurt in overseas demand for aircrafts, order for goods excluding the transport sector witnessed a decline. Additionally, gains in the US Dollar were extended after data from the Conference Board revealed that the US consumer confidence index rose to its highest level in almost seven years for August, suggesting that improving conditions in the nation’s labour market is likely to keep the domestic consumer spending firm for the months ahead. Markets will keep an eye on next week’s official jobs market report to verify whether domestic employment conditions show a similar improvement for August. Meanwhile, yesterday’s disappointing housing market data for June did little in remedying investors’ concerns about the mixed signals from the US real estate sector lately. With no major decisive domestic triggers in the US, the US Dollar continued to remain well supported against the majors this morning.

Euro – European Markets

Data released earlier today indicated that German GfK consumer confidence eased unexpectedly for September for the first time in more than one and a half years, as shoppers grew more cautious on account of the prevailing weakness in the region’s economy. Additionally, French business sentiment and Italy’s consumer morale showed deteriorating signs for August. With domestic conditions in the three key European economies showing no signs of improvements after the earlier stimulus measures from the central bank, further downside risks to the region’s economic growth cannot be ruled out. In the midst of steadily rising risks of the Euro zone economy sliding into deflation, this week’s inflation data from key European nations will be closely monitored in order to determine the policy actions that the ECB would embrace in the coming period. However, the Euro is trading on a firmer footing against the majors this morning. Meanwhile, with no important economic releases in the Euro zone yesterday, the Euro lost ground against the greenback and remained below the 1.32 mark following upbeat US macro data.

Other Currencies – Highlights

The Swiss Franc lost ground against the greenback in yesterday’s trading session following the release of upbeat US consumer confidence and durable goods orders data. Meanwhile, the Swiss Franc has recovered its losses this morning, despite data released earlier today showing that the consumption indicator in Switzerland dropped for July. The fall in private consumption was mainly led by deterioration in the consumer sentiment and a decrease in retail sales for July. However, a surprisingly strong level of vehicle sales kept the domestic consumption level supported. Additionally, the KOF leading indicator scheduled later this week is expected to show a further slowdown in the domestic economic activity for August. With no other important economic releases in Switzerland this week, markets will keep an eye on the revised GDP estimate and the Reuters/Michigan consumer sentiment report in the US as well as the inflation numbers from Germany and the Euro zone to provide further direction to the Swiss Franc against the majors.