Sterling Remains Supported Against the Euro

With latest economic releases from the UK instilling confidence among investors, the focus now shifts to upcoming crucial economic releases in order to gauge the future course of monetary policy. The GDP numbers in the forthcoming week might indicate that the nation’s recovery remains on track during the second quarter as highlighted earlier this month by the NIESR survey. Additionally, next week’s BoE minutes will be eyed for fresh perspectives on the timing of an interest rate hike. Across Europe, markets will keep a close watch on the events unfolding in Eastern Europe, especially after a Malaysian passenger airline was shot down yesterday. Across the Atlantic, the Reuters/Michigan consumer sentiment report will provide fresh insights into the consumer spending pattern for July.

Pound Sterling – UK Markets

With the BoE Governor, Mark Carney, earlier this week, reiterating his comments that the central bank might raise interest rates sooner than expected, this week’s upbeat labour market report and inflation data have further supported his views. Against this backdrop, market participants will keenly watch next week’s minutes from the latest BoE monetary policy meeting which would provide hints on the central bank’s future policy stance. Additionally, market participants would look forward to see whether concerns over slowing wage growth has resulted in any fresh scrutiny over the amount of slack in the economy. Meanwhile, the Pound is trading in a tight range against its major counterparts this morning. With little on the domestic economic calendar today, investors will keep a tab on the US Reuters/Michigan consumer confidence report for further direction to risk appetite. Apart from the BoE minutes, next week’s UK economic growth data will generate significant market interest, especially after the NIESR GDP estimate released earlier this month revealed that economic growth remained on track during the second quarter.

US Dollar – US Markets

Amid signs of further escalation in geopolitical worries in Eastern Europe, the US Dollar hovered close to its recent highs against the majors, as traders flocked towards safe haven assets. Meanwhile, economic releases from the US displayed a mixed picture, as the weekly jobless claims data surprised markets on the upside, while housing starts fell sharply for June. The disappointing housing starts report continued to highlight that the housing sector could pose serious challenges to the US economic recovery in the near future. Amid uncertainty surrounding the future course of monetary policy in the US, the St. Louis Fed Chief, James Bullard, stated that the Fed needs to be prepared to hike interest rates earlier than planned, if economic conditions improve at the current pace. The greenback is trading in a tight range against its most of the majors this morning. Today’s Reuters/Michigan consumer sentiment report will be eyed which is likely to show an improvement for July. Going forward, next week’s US inflation reading along with housing and manufacturing sector reports will keep investors interested. Separately, traders will keep a close watch on events unfolding in Ukraine.

Euro – European Markets

Yesterday’s attack on a civilian flight above the Ukrainian airspace attracted considerable attention from European officials. Following the events in Eastern Europe, the Euro fell against the safe haven currencies. However, the Euro advanced against the Pound yesterday. With recent spate of mostly disappointing economic reports from the Euro zone, investors will now be focused on the upcoming macro data, especially to gauge the trend in the region’s economic growth following worrying signals emerging from the region’s financial system. Against this backdrop, next week’s July manufacturing and services PMI data from most of the European economies along with Euro zone consumer confidence and German Ifo sentiment data will be eyed. With tensions in Ukraine resurfacing once again after the European Union agreed to impose additional sanctions on Russia and following yesterday’s crash of a Malaysian passenger jet near Ukraine-Russia border, investors are likely to closely track fresh developments in the region. Additionally, a speech from the German President will be eyed for further direction.

Other Currencies – Highlights

The Japanese Yen dropped against the US Dollar this morning following the minutes of the Bank of Japan’s latest monetary policy meeting. The minutes indicated that nation’s sluggish exports and geopolitical tensions surrounding Ukraine and Iraq might hamper Japan’s inflation in the near term. Additionally, the central bank provided no further cues on whether the bank is considering expanding its quantitative easing programme going forward. Yesterday, the Japanese Yen advanced against the US Dollar in a risk off trading session amid concerns over escalating geopolitical tensions in Ukraine after a Malaysian airline collapsed near the Ukraine-Russia border. With no decisive domestic triggers today, investors will keep a tab on the US Reuters/Michigan consumer confidence report which is likely to show an improvement for July. In the forthcoming week, market participants will await inflation readings from Japan and the US to gauge inflationary trends in both the countries.