ECB Will be the Cynosure of All Eyes This Week
Today, the global economic calendar is relatively light, taking a breather after a whirlwind week which witnessed surprising political and economic developments from different parts of the world. In the UK, dramatic sequences outplayed last week. Firstly, the Bank of England (BoE) surprised markets by holding the benchmark interest rate steady, and on the political front Theresa May replaced David Cameron as British Prime Minister. The European Central Bank’s (ECB) interest rate decision stands out as the big event of this week.
Today in the Eurozone, the German Bundesbank is scheduled to release its monthly report on the German economy. Meanwhile in the UK, the BoE policy maker, Martin Weale, indicated that he needs further evidence on the impact of Brexit to support additional stimulus at the central bank’s August meeting. Across the Atlantic, the NAHB housing market index for July is awaited.
Pound Sterling – UK Markets
The Pound is trading higher against the US Dollar and the shared currency this morning. Earlier in the session, data showed that UK’s Rightmove house price index declined in July. Looking ahead, this week will turn out to be a busy one for Britain, with a slew of economic data points lined up for release. The nation’s consumer price index report for June, due tomorrow, is likely to provoke fresh volatility in the Pound, as market participants will be keen to get an idea of domestic inflationary pressure. As the week progresses, Britain’s retail sales and ILO unemployment rate, along with the nation’s manufacturing and services PMI data, will continue to grab attention.
On Friday, Sterling reversed its previous session gains triggered by the BoE’s surprise decision to keep benchmark interest rate on hold. Investors were discouraged to find that the UK’s construction output fell sharply in May. Further downside pressure was added to Sterling after the BoE’s Chief Economist, Andy Haldane, called for prompt monetary policy easing measures in order to stimulate Britain’s economy.
US Dollar – US Markets
On Friday, the greenback gained ground against most of its major peers following the release of upbeat economic reports out of the US. The good news began with the forecast-defying US retail sales data. The nation’s retail sales rose for the third consecutive month in June, as consumers splurged on motor vehicles and a variety of other goods, thus reinforcing the belief that the US economy has regained speed after a first quarter lull. The nation’s optimistic mood received another upward thrust after US industrial production rebounded above expectations to an eleven-month high in June. Additionally, US consumer prices advanced for the fourth straight month in June. The string of buoyant reports managed to eclipse a couple of disappointing US results. Factory activity across the New York state slowed in July after posting a big gain in the previous month, and a report from the University of Michigan showed a notable deterioration in consumer sentiment in July.
Going ahead, investors await the US NAHB housing market index data for July, due later today.
Euro – European Markets
The shared currency is trading mixed against the US Dollar and the Pound this morning. The sole economic release in the Eurozone today is the German Bundesbank Monthly Report, which contains relevant articles and speeches and provides a detailed analysis of current and future economic conditions from the German central bank's viewpoint. The week’s primary focus for the Euro will be the ECB’s interest rate decision, wherein the policymakers are expected to adopt a ‘wait and see’ mindset. The central bank’s view on Brexit will also be of significant interest. Apart from this, there are also a few important economic releases due this week, including the Eurozone’s consumer confidence along with the region’s manufacturing and services PMI data for July.
On Friday, the Euro ended lower against the US Dollar, as the greenback gained strength across the board following the release of upbeat US economic reports. On the domestic data front, Eurozone’s consumer price index advanced in line with expectations in June. In contrast, the region’s trade surplus narrowed in May.
Other Currencies – Highlights
The Kiwi Dollar lost ground against the greenback this morning after data released earlier in the session showed that New Zealand’s inflation figure came in less than expected during the second quarter of this year. This latest economic update led the market to price in higher chances of an interest rate cut at the Reserve Bank of New Zealand’s (RBNZ) monetary policy meeting next month. On the other hand, according to the latest performance of services index, New Zealand's services sector continued a steady rate of expansion in June.
Moving ahead, investors will look forward to New Zealand’s global dairy trade price index due tomorrow. Further ahead this week, the visitor arrivals data released by Statistics New Zealand will also gain market attention as tourism industry dominates a large part of the nation’s total GDP. In addition to this, the RBNZ’s economic update, due later this week, will be closely watched by investors for clues to its August interest rate decision.