Draghi’s Speech and Fed Minutes in the Spotlight
Market participants are on high alert ahead of the European Central Bank (ECB) President Mario Draghi’s speech, which will be followed later today by the release of US Federal Reserve’s (Fed) June monetary policy meeting minutes. Both these events will thrust the divergent monetary policy outlook projected by these central banks back into the spotlight. While it remains to be seen whether the ECB Chief drops any further hints of additional easing, the Fed minutes will bear witness to how concerned the policymakers were about US employment and Brexit.
Data-wise, UK is devoid of any significant data releases today. In the Eurozone, data out earlier today showed that German factory orders registered a flat reading in May. Across the Atlantic, the US trade balance and ISM services PMI report will be closely eyed.
Pound Sterling – UK Markets
Yesterday the Pound resumed its fall against the US Dollar, sinking to its lowest level since September 1985. The latest catalyst came in the form of three top British real estate funds. These firms halted redemptions from their property trusts, irked by rapid cash outflows in recent days, as Brexit claims its first casualty. Moreover, Sterling witnessed another blow after the Bank of England (BoE) Governor, Mark Carney, warned that the outlook for UK’s financial stability was “challenging”. The central bank, in its bi-annual financial stability report, unveiled new rules that would help ease capital restrictions on domestic lenders. The BoE Governor also pledged to do whatever is needed to ensure Britain’s monetary and fiscal stability.
The latest news from Britain’s macroeconomic front wasn’t rosy either. Earlier in the session, data showed that UK’s BRC shop price index further dropped in June as food prices saw their biggest fall in over a year. There are no other significant data points up for release in the UK today.
US Dollar – US Markets
The greenback is trading on a stronger footing against most of its major peers this morning, as concerns about a slowdown in global growth continue to weigh on markets. Later today the US Fed will release minutes of its June monetary policy meeting, when the central bank held key interest rates steady following the release of a weak jobs report in May and amid Brexit concerns. The minutes will shed light on how worried the Fed was about the domestic economy. In addition to this, there are several other economic releases lined up today in the US. These include the nation’s trade balance, services PMI and the weekly mortgage applications data.
Yesterday, the US Dollar ended higher against the Pound and the shared currency, as risk aversion swept through global markets and investors looked for solace in the safe-haven currency after the BoE issued fresh Brexit warnings. On the data front, US factory orders fell more than expected in May after two consecutive monthly gains, amid weak demand for transportation and defence capital goods.
Euro – European Markets
The shared currency is trading mixed against the US Dollar and the Pound this morning. Data released earlier in the session showed that German factory orders underperformed against investor forecasts in May, owing to weak domestic demand amid uncertainty over the global growth outlook. Additionally, the nation’s construction PMI fell in June. Meanwhile, Spanish industrial output rose less than expected in May. Durable consumer goods and intermediate goods registered a positive growth, but this was offset by a drop in the production of capital goods and non-durable consumer goods. Going ahead, the ECB President, Mario Draghi, is scheduled to deliver opening remarks at the eighth ECB Statistics Conference in Frankfurt today. Market participants will search for hints related to further stimulus measures from the central bank.
Yesterday, data indicated that the Eurozone’s retail sales, a proxy for household spending, advanced in line with market expectations in May, recording this year’s highest monthly increase. The growth was driven by increased sales of non-food products, which mainly comprises of textiles, medical goods and electronic appliances.
Other Currencies – Highlights
The Kiwi Dollar extended its previous session losses against the greenback this morning amid a broad based strength in the US Dollar. On the economic release front, whole milk powder prices at New Zealand’s latest global dairy trade auction continued to remain depressed, indicating that demand is not currently strong enough to absorb the plentiful supply.
In other economic news, New Zealand’s business sector seems to be brimming with confidence as the nation’s NZIER business confidence index surged during the second quarter of this year, fueling positive sentiment in the face of global uncertainty. There was more positive news as New Zealand’s commodity prices rose for a second consecutive month in June, notching its strongest gain since October 2015. Moreover, New Zealand house prices witnessed a robust improvement in June.