Data just released showed that Britain’s trade deficit narrowed unexpectedly in May, suggesting that net trade has contributed to economic growth in the second quarter. However,growth in the British construction sector has risen below market consensus for May.

Across the Atlantic, focus will be on the US Fed Chairwoman Janet Yellen’s speech scheduled later today, which comes ahead of her semiannual testimonies next week. Meanwhile, the Greek government last night sent concrete reform proposals to its creditors, thus reigniting hopes that a new bailout deal could be reached this weekend. Against this backdrop, today’s upbeat French industrial and manufacturing production data stirred limited market interest.

Pound Sterling – UK Markets

Just released data showed that UK’s trade deficit narrowed to its lowest level in nearly two years for May and pushed down by a fall in imports, while the April trade deficit was revised higher. Sterling has extended its gains against the US Dollar, post the economic release. Meanwhile, construction activity grew below market forecasts for May.

The BoE left the benchmark interest rate unchanged at a record low of 0.5% yesterday, amid intensifying risks of a Greek departure from the Euro zone weighing on economic outlook. Markets now seem to be less optimistic about the central bank raising rates soon, even as recent figures including a pickup in pay rises and robust service sector performance have improved the outlook for the domestic economy. Lower inflationary pressures and worries about demand outlook in the Euro zone have cast doubt over the timing of an interest rate rise. The Pound remained moderately higher against the majors post the BoE’s decision, however by the end of the trading session, Sterling had surrendered most of its gains against the US Dollar.

US Dollar – US Markets

The US Dollar is trading broadly lower against the major currencies this morning. In the absence of any notable macroeconomic indicators in the nation today, investors will closely monitor US Federal Reserve Chairperson Janet Yellen’s speech later today, after minutes of the last monetary policy meeting failed to provide clarity on the timing of an interest rate rise. Mounting concerns surrounding the ongoing Greek debt crisis and a somewhat disappointing June labour report seem to have pushed back expectations of a rate increase until later in the year. It is possible that the Fed Chief will reaffirm that the rate movement will be data driven and with plenty of time to evaluate economic conditions until the September meeting, it is unlikely that she will provide any rate rise signals in today’s speech.

Yesterday, data showed that initial jobless claims rose unexpectedly last week. However, the latest data was possibly impacted by seasonal adjustments relating to annual summer shutdowns particularly in the auto sector and the timing of the Independence Day holiday.

Euro – European Markets

The Euro moved above the 1.11 mark against the US Dollar earlier today, buoyed by fresh optimism that an agreement between Greece and its troika of creditors could be reached soon. The Greek government yesterday offered a package of reform proposals to its creditors to secure more bailout funds before the cash strapped nation descends into financial crisis. In the latest proposal, Greece is seeking €53.5 billion over the next three years and in exchange has agreed to some of the creditors’ austerity measures. The Greek Prime Minister Alexis Tsipras will seek a parliamentary vote on Friday on the proposal. The Greek proposal will then be reviewed by Euro zone finance ministers on Saturday.

It is a light day for economic releases in the Euro zone today. Data released earlier today showed that output in France’s industrial sector grew in line with market consensus for May. Also, manufacturing production surged higher than projections for the same month, adding to evidence that Euro zone’s second largest economy gained traction in the second quarter.

Other Currencies – Highlights

The Canadian Dollar has recovered part of its losses against the US Dollar this morning following a rebound in oil prices. In the session ahead, investor focus will be on Canada’s labour market report with markets anticipating the unemployment rate to rise to 6.9% for June.

Meanwhile, the Organisation for Economic Cooperation and Development (OECD) recently reported that Canada’s job market stands out among its 34 member countries and forecasted that jobless rate in Canada should decrease to 6.5% by the end of 2016, down from 6.7% at the end of 2014. The OECD stated that the nation has had a fairly robust recovery in its labour market since the trough of the global recession. The upbeat guidance by the OECD fuels hopes that the Bank of Canada will not lower its interest rate in next week’s widely awaited monetary policy meeting. However, the downside surprise witnessed in the April GDP reading and disappointing export numbers for May signal that the BoC could lower its growth forecasts.