Data just released indicated that the UK’s industrial and manufacturing production improved for July, in contrast to the weakness seen in last week’s dismal manufacturing activity report, though the nation’s trade deficit has widened more than expected. Going forward today, NIESR GDP estimate and a speech by the BoE Governor will attract increased market attention for further direction. Furthermore, investors will keep a close watch on updates related to Scotland after recent poll surveys have displayed a continued surge in votes for an independent Scotland ahead of its referendum next week.
In the Euro zone, developments in Eastern Europe will keep traders on the edge after the EU slapped new economic sanctions on Russia. However the EU has withheld its implementation subject to the outcome of the ongoing ceasefire negotiations between Ukraine and Russia.
Pound Sterling – UK Markets
In contrast with last week’s dismal manufacturing sector report, today’s just released industrial and manufacturing output data showed an improvement for July. The encouraging figures are in line with last week’s upbeat construction and services PMI and have thereby raised hopes for a steady recovery during the third quarter. Separately, another report showed that trade deficit in the nation widened unexpectedly for July. Going forward today, markets will keep a tab on today’s NIESR GDP estimate, especially after the agency estimated a slowdown in UK economic recovery for the three month ended July. Today’s speech by the BoE Governor will be eyed in order to ascertain his views about the central bank’s policy stance going forward. Furthermore, uncertainty surrounding Scottish independence will keep investors on their toes, after another poll showed an increase in support for an independent Scotland.
The Pound fell below 1.61 mark against the US Dollar yesterday after a weekend poll highlighted the risk that Scotland might vote for independence in its referendum next week.
US Dollar – US Markets
After last week’s US labour market data indicated a sharp drop in the number of job additions for August, today’s NFIB report will be keenly eyed to verify whether morale among small firms has taken a hit or not. Considering the role of small businesses in improving the hiring pace in the US lately, any downside surprise in the NFIB survey might heighten investors’ concern that last month's stumble in the US labour market growth might not be an isolated event. Additionally, in the absence of any other major domestic macro triggers today, a speech by the US Fed Board Member, Daniel Tarullo, will be keenly watched for cues on the Fed’s policy plans after the central bank’s bond buying programme comes to an end.
Meanwhile, the greenback gained ground against the Euro in yesterday’s trading session. Data released yesterday showed that US consumer credit rose more than expected for July, affirming signs of improving domestic confidence. Additionally, prospects of fresh EU sanctions to be imposed on Russia kept the greenback supported against the Euro.
Euro – European Markets
The Euro dropped against the greenback yesterday. The EU adopted new sanctions against Russia for its military activity in Ukraine. These sanctions will not come into effect immediately, as the implementation will depend on the outcome of the ongoing ceasefire negotiations between Ukraine and Russia. Markets also shrugged off yesterday’s upbeat German trade data for July, amid fears that Russia might cut down its gas supply to Europe, especially after last week’s warning given by the Russian Foreign Minister that any more EU sanctions would trigger counter measures. This, along with last week’s ECB surprising decision to add additional unconventional monetary easing measures, has continued to pressurise the Euro. Meanwhile, an ECB official, Ewald Nowotny, indicated that the central bank’s recent stimulus measures might not be sufficient to solve the economic challenges in the region without any fiscal policy reforms by the European nations.
The Euro is trading in a tight range against the majors this morning. Meanwhile, today’s US NFIB optimism survey along with a speech from the BoE Chief are expected to provide further direction to the Euro.
Other Currencies – Highlights
The Australian Dollar has lost ground against the US Dollar in today’s trading session following the release of downbeat National Australia Bank’s business confidence survey. The survey indicated that sentiment among domestic firms deteriorated for August, stoking concerns that the domestic activity is losing steam amid a slowdown in mining investment, despite consumer confidence improving for August. Additionally, growth in domestic home loans came in less than market estimates for July, as a drop in demand among owner occupiers failed to offset improving demand among real estate investors. Meanwhile, Manpower’s report upgraded the Australian employment outlook for the fourth quarter of 2014 and this week’s labour market report is likely to remain on investors’ radar to verify for signs of improvement in the nation’s employment conditions.
Furthermore, today’s US NFIB small business morale survey for August along with the US Reuters/Michigan consumer sentiment survey on Friday are expected to provide further direction to the Australian Dollar-US Dollar pair this week.