Markets Eye UK Employment Data as Lira Calms Down
What’s been happening?
Pound Sterling – UK Markets
The pound stayed virtually unchanged against both the euro and the dollar on Monday as the Turkish lira’s meltdown seemed to be taking a breather. Also, investors refrained from committing to large positions ahead of Tuesday’s critical macroeconomic data releases.
Meanwhile, a poll conducted by The Independent on Monday showed that the public backing for a ‘Final Say’ referendum had jumped four points in July as worries over the lack of support for Prime Minister Theresa May’s Brexit plan continues to cloud people’s minds. As the situation in Turkey goes back to normal, investors are likely to turn their attention back to Brexit in the coming days.
US Dollar – US Markets
The US Dollar Index advanced to its highest level in more than a year at 96.52 on Monday but struggled to preserve its momentum in the second half of the day as the lack of macroeconomic data releases in the United States paved the way for a consolidation period.
The monthly report released by the Federal Reserve Bank of New York revealed that Americans’ median inflation expectations at the one-year horizon were unchanged at 3% while their earnings growth expectations fell to 2.4% in July from 2.7% in June. On a positive note, “median expected household income growth rebounded slightly to 2.7 percent, reversing a three-month decline. The outlook for household spending growth and year-ahead earnings growth also recovered from recent dips,” the NY Fed said in its publication.
Euro – European Markets
With hopes of the impact of lira crisis on the European financial institutions and the economy staying limited, the euro has found footing on Monday and showed resilience against its rivals. On Tuesday morning, the Statistisches Bundesamt Deutschland announced that the inflation measured by the CPI stayed unchanged in July at 0.3% and 2% on a monthly and yearly basis, respectively, to match June’s readings and analysts’ expectations. In the meantime, the real-GDP growth in the second quarter in Germany on a quarterly basis improved to 0.5% from 0.3% in the first quarter while the annual rate rose to 2.3% from 1.6%, according to the advanced estimates.
What’s coming up?
UK: The Office for National Statistics (ONS) will release the ILO unemployment rate, which is expected to remain steady at 4.2.%. The claimant count change, the number that represents the difference in the number of unemployed people, is seen to ease to 3,800 in July from 7,8000 in June. Furthermore, the report will include average earnings including/excluding bonuses. Although the unemployment figures are unlikely to receive a significant reaction from the markets, a higher-than-expected growth in wage inflation could help the sterling start recovering its recent losses as it would point to a higher probability of the BoE considering more rate hikes.
US: The NFIB Research Foundation will publish the Business Optimism Index, which is expected to edge down to 106.9 in July from 107.2 in June. The US Department of Labor will release the import & export price indexes as well.
EU: The Zentrum für Europäische Wirtschaftsforschung (ZEW) will publish the results of its latest sentiment survey and investors will be focused on the headline Economic Sentiment Index figures and the change in the Current Situation Index. The Eurostat will release its advanced estimate for real-GDP growth in the eurozone in the second quarter. A nice rebound seen in Germany’s economic expansion rate earlier today is likely to have a positive impact on the eurozone growth. Nevertheless, analysts expect the rate to stay unchanged at 0.3% and 2.1% on a quarterly and yearly basis, respectively.