Britain’s Public Accounts Show Surplus in July
The just released Britain’s public sector borrowing data has delivered positive news in the form of a budget surplus for July, the first in nearly three years, suggesting that the British Chancellor George Osborne’s plans to eliminate the budget deficit is steadily succeeding.
In Europe, growth in private sector activity in the Euro zone and its largest economy unexpectedly accelerated in August, signalling that the overall economy is recovering steadily in the third quarter. However, the French manufacturing sector slipped further into contraction territory. Separately, just as the dust had settled in Greece, Prime Minister Alexis Tsipras resigned and has called for a snap election. Across the Atlantic, the August manufacturing PMI will be eyed later today.
Pound Sterling – UK Markets
Sterling traded sharply lower against the majors yesterday after data showed that the broad measure of UK retail sales fell short of market estimates for July. Even though the retail sales figures were slightly lower than expected, improving wage growth, falling fuel prices and a low interest rate environment seems to have supported consumers’ discretionary spending power last month. Meanwhile, UK manufacturing orders made an unexpected recovery in August while export orders, as reported by the CBI yesterday, continued to struggle on the back of a strong Sterling. The strength of the home currency and a slide in energy prices have reduced factory costs, but at the same time, the strong Pound has affected the competitiveness of British export products in the European and other overseas markets.
The Pound – US Dollar currency pair has hardly responded to the just released British government budget data. The official figures showed a budget surplus for July, as tax receipts rose, indicating that the government’s effort to bring down the budget deficit has been steadily making progress.
US Dollar – US Markets
The US Dollar is trading on a weaker footing against the Euro and the Japanese Yen this morning. The US Dollar seems to have lost some momentum after the minutes of the US Fed’s last meeting earlier this week indicated that policy makers were willing to wait and watch before initiating a rate rise. Meanwhile, there is little data on tap in the US today that could spur gains in the US Dollar against its key peers. The only US economic data that has the potential to influence trading in the greenback against the major currencies is the early publication of US manufacturing activity for the current month. The Markit flash manufacturing PMI data which is scheduled later in the day is anticipated to show a small pickup in industrial activity for August.
Yesterday, data showed that US home re-sales jumped to a multiyear high for July and factory activity in the mid-Atlantic region surged higher than market expectations for the same month, providing fresh evidence of steady US economic growth. Meanwhile, claims for first time jobless benefits unexpectedly inched higher last week, but the trend remained consistent with a strong labour market.
Euro – European Markets
The Euro picked up pace against its key peers earlier this morning. On the data front, the European calendar which remained light throughout the week, had on tap today a string of flash manufacturing and services PMI from the Euro zone and its various economies and a German consumer sentiment survey. However, economic news that came out of the Euro bloc this morning failed to strengthen investor sentiment. Manufacturing PMI indices out of Euro zone’s largest two economies painted a mixed picture for August, with activity in French manufacturing sector lagging while an increase in output and new orders in Germany pushed the manufacturing index to a multi month high. However, GfK survey data revealed that consumer morale in Germany has slightly dampened heading into September, as persistent fears about the Greek debt crisis weighed on consumer sentiment. The Euro surrendered part of its gains against the majors, post the economic releases.
Meanwhile, Greece is getting ready for fresh elections following the resignation of its Prime Minister Alexis Tsipras yesterday.
Other Currencies – Highlights
The Japanese Yen is trading broadly higher across the board today, with the US Dollar – Japanese currency pair slipping below the 123.00 mark. The Japanese Yen is likely to remain well supported today unless there is a major turnaround in sentiment. The Japanese Yen remains well bid following the weak PMI manufacturing numbers from China and the resignation of the Greek PM.
In economic news, preliminary PMI data released earlier in the day indicated that Japanese manufacturing activity fell shy of market estimates for August but the sector expanded at its fastest pace in seven months on the back of improved domestic demand in the world’s third largest economy. The upbeat manufacturing PMI numbers suggests that the economy might resume growing in the second half of this year, despite extended period of export weakness that could limit recovery in the economy.