UK GDP Remains Firm

Industrial and manufacturing output data in the UK released yesterday disappointed the markets, thereby ending a long run of strong economic data and dampening hopes of a smooth and balanced recovery in the nation. However, economic growth in the nation remains strong as suggested by the upbeat NIESR GDP report for the second quarter released yesterday. Across the Atlantic, today’s Fed minutes will be in focus to ascertain whether other policymakers remain in line with the view offered by the US Fed Chief, Janet Yellen, during her earlier post-meeting press conference. In the Euro zone, Mario Draghi’s speech later in the day will attract market interest for cues over the future policy stance. 

Pound Sterling – UK Markets

Disappointing UK industrial and manufacturing production reports released yesterday raised doubts over the efficacy of the recent upbeat manufacturing PMI data, resulting in the Pound to drop sharply against its major peers. However, Sterling recovered its losses against the majors later in the day after the NIESR GDP report raised hopes that economic recovery in the nation remained intact during the second quarter. This could possibly make the situation a little trickier for the BoE going forward and might result in a greater scrutiny of the economic data going forward. The Pound is trading in a tight range against the majors this morning. Data released earlier today indicated that Halifax monthly house prices in the UK declined more than expected while the BRC shop price index dropped further for June. With no major UK economic releases today, markets will keep a close watch on a testimony by Nemat Shafik, who is set to join as the Deputy Governor of the BoE in August, for her views on the economy and the current monetary policy stance.

US Dollar – US Markets

In a relatively calm week in terms of economic releases, today’s FOMC minutes is likely to attract market attention in order to decipher the direction for the greenback during the course of the week. The US Fed Chief, Janet Yellen, in the post-meeting conference last month, maintained that interest rates will remain at lower levels for a prolonged period. Although the central bank’s projections during the recent policy meeting offered insights into the consensus view for interest rates in the coming years, market participants are likely to read between the lines in today’s FOMC minutes for greater clarity over the probable timing of an interest rate hike in the US. Meanwhile, the US Dollar is trading close to yesterday’s lows against the majors this morning in the build up to the FOMC minutes. Encouraging labour market data in recent months has cemented hopes of the US economy registering robust growth for the second quarter. However, Minneapolis Fed President, Narayana Kocherlakota, reaffirmed his dovish view by stating that the US labour market has a long way to go until the central bank achieves its labour market goals.

Euro – European Markets

The Euro is trading in a tight range against the majors in today’s trading session ahead of the ECB President, Mario Draghi’s speech later today. His comments are unlikely to rattle markets, as he is widely expected to reiterate his earlier views. However, with few German policymakers in the ECB casting aspersion over prospects of a possible asset-buying by the ECB, it remains to be seen if the ECB Chief will remain vocal in voicing his support for asset purchases by the central bank to deal with future shocks. Additionally, comments from other ECB policymakers today will gain attention along with the Fed minutes for further direction to risk appetite. Meanwhile, the Euro edged higher against the greenback in yesterday’s trading session despite weak German imports and exports data. Reports indicated that Greece is preparing for a bond auction later today. With the troika of international lenders returning to Athens today in order to monitor the progress made by the debt laden nation, it remains to be seen how markets react to these initiatives by Greece as the nation tries to pave its path towards future fiscal consolidation.

Other Currencies – Highlights

Gains in the Aussie Dollar was capped after data from China showed that consumer price inflation eased more than expected in June. However, the domestic economy offered encouraging signals, as data showed an improvement in the Westpac consumer confidence for July. Going forward, investors will keep a close watch on today’s US Fed minutes for further direction to risk appetite. Later in the week, tomorrow’s Australian labour market report will attract a considerable market attention, wherein it is likely to show that the unemployment rate marginally ticked higher. Besides, the Chinese trade balance data scheduled for release tomorrow will also be subject to scrutiny, given the influence of the Chinese economic releases on the Aussie Dollar.