What’s been happening?

Pound Sterling – UK Markets 

With no major data out of the UK over the weekend, futures markets continued to price in around a 50% chance of an interest rate hike at the August Bank of England policy meeting. During last week’s meeting, the BoE signalled it may have the appetite to raise interest rates in either August or November, which saw the Pound move sharply higher on the day and with no key fresh data out until Brexit summit at Brussels this Thursday, we can expect the Pound to swing around 1.14 against the Euro over coming days. 

The Pound is expected to be hampered by political uncertainty caused by internal Conservative Party tensions and expectations that the UK government is likely to be subjected to heavy criticism at this week’s EU summit where Brexit and UK / EU trading future will be discussed. Sterling was barely changed this morning, as it held just above 1.3240 against the Dollar and 1.1359 against the Euro. 

US Dollar – US Markets

US private sector output rebounded in June, buoyed by a strong pace of service sector growth. The services-sector index came in at 56.5 from 56.8 previously and recorded the sharpest increase in service charges for almost four years. The US PMI manufacturing index declined to a 7-month low of 54.6 from 56.4 the previous month with a slowdown in new orders growth. Commenting on the flash PMI data, Chris Williamson, a chief business economist at IHS Markit, said, "The flash PMI surveys add to evidence that the US. The economy is enjoying a strong second quarter. Despite growth cooling slightly in June, the latest numbers round off the best quarter for three years and suggest economic growth has lifted markedly higher than the 2.3% rate of expansion seen in the first quarter to well over 3%."

Euro – European Markets

The IHS Markit Eurozone Composite PMI rose from 54.1 in May to 54.8 in June, according to the flash reading. However, the Eurozone manufacturing PMI index declined to an 18-month low of 55.0 from 55.5 previously and fell in line with consensus forecasts. There was, however, the encouragingly stronger inflow of new orders, after having fallen to a one and a half year low in May, registering the largest gain since April. Hiring also picked up, with June seeing the largest payroll gain since January and one of the steepest rises seen over the past 18 years. Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said: “An improved service sector performance helped offset an increasing drag from the manufacturing sector in June, lifting Eurozone growth off the 18- month low seen in May. With growth kicking higher in June, the surveys are commensurate with GDP rising 0.5% in the second quarter.”

The latest PMI data indicated a more confident Eurozone tone and pricing data should boost ECB confidence in reducing stimulus, however political uncertainty in Germany and Italy restricted underlying Euro support during over the weekend. 

What’s coming up? 

UK: As well as following developments of the ongoing Brexit negotiations, markets will be looking ahead to Bank of England Governor Mark Carney’s speech on Wednesday.  

US: The US Markets will be looking at May’s month on month new home sales data out later this afternoon. Q1 Gross Domestic Price index as well as Core Personal Consumption Expenditures will be out on Thursday. 

EU: Euro markets will be looking ahead to Germany’s Gfk Consumer Confidence Survey for the month of July out Thursday morning, followed by Germany’s Preliminary Harmonized Index of Consumer Prices released in the afternoon.