ECB Monetary Policy Meeting in Focus
It is a light economic calendar day in the UK. The European Central Bank’s monetary policy meeting will take centre stage today, with Greece expected to dominate today’s policy statement and the post-meeting press conference. Meanwhile, the Greek Prime Minister Alexis Tsipras overcame a major hurdle yesterday after the Greek Parliament approved the third bailout package. In economic news, Euro zone’s final CPI and trade balance figures will be released shortly.
Across the Atlantic, the latest unemployment claims, Philadelphia Fed manufacturing conditions survey and NAHB housing market data is scheduled later today. Also, the second round of the Federal Reserve Chairperson’s testimony before the Senate Banking Committee is due later today.
Pound Sterling – UK Markets
Sterling is trading lower against the US Dollar this morning, amid the absence of any significant macroeconomic indicators to influence trading in the currency pair. Meanwhile, the Euro-Pound currency pair is facing downward pressure, with the pair hovering close to the 0.70 mark. Later in the day, investors will note the Conference Board’s leading indicator that measures the trends of overall economic activity including employment, productivity and housing construction in the UK.
The Pound nudged lower against the US Dollar yesterday after the jobless rate in the UK ticked higher for the first time in two years for the March to May period, defying expectations of an unchanged reading. On a brighter note, the three months average earnings, including bonuses, rose at the fastest pace in more than five years, though shy of market estimates. However, the Pound recovered most of its losses to trade in a narrow range against the greenback in the latter part of the trading session. The Euro-Pound currency pair has moved below the 0.70 mark, amid mounting geopolitical worries in Greece.
US Dollar – US Markets
The US Dollar moved higher against the Euro yesterday after the US Fed Chairwoman Janet Yellen reiterated that the central bank is on course to raise interest rates at some point this year. In the semi-annual testimony to US lawmakers, the Fed Chief stated that the prospect of a further improvement in the US labour market and the economy makes it favourable for the Fed to raise interest rates this year. Better than expected economic data released yesterday also added fuel to the Fed’s rate rise plans. Data showed that industrial production in the US rebounded for June, boosting optimism about the health of the economy. US producer prices also topped market estimates for June.
Today, market participants will note the latest unemployment claims data to gauge the trend in the US labour market after the last two weekly updates showed an increase in the number of new filings for jobless benefits. If today’s jobless claims data also shows a rise, it will provide investors with a new reason to wonder if the Fed Chief’s current optimism about the near term future is misguided. The NAHB housing market data due later today will also be viewed for further direction.
Euro – European Markets
Today, market focus will shift towards the ECB monetary policy meeting. With investors widely anticipating no change in the benchmark interest rate, the limelight will be on the post-meeting press conference. Greece issues are likely to dominate, with the ECB Chief Mario Draghi’s remarks being closely monitored to gauge whether the recent turmoil has affected the central bank’s assessment of the Euro zone economy. There is a possibility that the ECB will increase its assistance to Greek banks to help the cash strapped nation from descending into a deep financial crisis. Meanwhile, the Euro is trading weaker against the major currencies this morning ahead of key economic releases including Euro zone CPI and trade balance figures scheduled ahead of the ECB’s decision.
Amid the persistent turmoil in Greece, the nation’s lawmakers approved the crucial bailout package presented by the Greek Prime Minister last night. Looking forward, Euro group officials will today begin negotiations for a bridging loan to cover Greece’s financing needs while details of the bailout deal are agreed.
Other Currencies – Highlights
The report that was released earlier in the day showed that Swiss retail sales declined in May compared to a year ago, dampening optimism about the health of the economy. The data follows a considerable rebound in retail sales witnessed in April. The latest weak retail sales report has reignited concerns of a further slowdown in the economy during the second quarter. However, the Swiss Franc has shown limited reaction to the disappointing retail sales report, while it continues to trade on a weaker footing against the US Dollar. Going forward, market participants will keep an eye on a string of US economic releases including the latest update on the unemployment benefit claims, Philly Fed manufacturing index and NAHB housing market report for further direction.
The Swiss Franc was under pressure against the majors yesterday after the ZEW survey showed that the economic expectations index in Switzerland dropped in July. However, the assessment of current economic conditions in Switzerland was slightly more positive.