Eurozone and US Consumer Prices Data Awaited
Today is a busy day for the global economy, with several significant data points up for release. The US consumer price inflation and retail sales data, along with the University of Michigan’s consumer confidence survey, will be on traders’ radars. Investors will also look forward to the US industrial production data for further clues.
The just published data revealed that UK’s construction output dropped more than expected in May, its fifth straight monthly fall. After the Bank of England’s (BoE) unexpected decision to leave the benchmark interest rate unchanged, Governor Mark Carney is expected to give a speech later in the day. The final print of Eurozone’s consumer price index and its foreign trade data are scheduled to be released in a short while.
Pound Sterling – UK Markets
Yesterday, the Pound rallied against the US Dollar and surpassed the crucial 1.34 handle for the first time in more than two weeks, after the BoE decided to keep its benchmark interest rate unchanged at its policy meeting. The bank also maintained its monthly asset purchases facility at £375.00 billion. However, the minutes of the BoE’s recent meeting revealed that, despite the July inaction, the nine-member panel did hint that it will loosen policy at its meeting next month, when it will have a new forecast to gauge the strength of the British economy after the economic upheaval caused by the Brexit vote. Meanwhile, the just out data showed that construction output in the UK sharply declined in May, surpassing market consensus and recording its fifth consecutive monthly decline.
Looking into the next week, a slew of crucial macroeconomic data is up for release. Consumer price inflation and retail sales for June, along with the claimant count data for the same month, will be closely watched by market participants. It will be interesting to see what picture this data paints for the UK economy.
US Dollar – US Markets
Yesterday, the US Dollar ended lower against most of its major peers. Data released in the US revealed that the number of people who filed for initial jobless benefits remained unchanged last week at a three-month low level, compared to market expectations of an increase by 11,000, signaling optimism over the health of the nation’s labour market. Meanwhile, the nation’s continuing jobless claims climbed higher than market expectations last week. On the data front, US producer price inflation advanced higher than estimated in June, notching the largest monthly rise since May of last year, while the core prices also reported a bigger increase. Notably, the Atlanta Fed President, Dennis Lockhart, suggested that the central bank should adopt a wait and watch approach to raise interest rates until a clearer view on Brexit’s impact is available.
The greenback is trading on a weaker footing against the Pound and the common currency this morning. Moving forward, market participants will focus on the US advance retail sales, consumer price index, capacity utilisation and industrial production data, scheduled later in the day.
Euro – European Markets
The shared currency is oscillating between gains and losses against the greenback and the Pound ahead of the release of Eurozone’s inflation data for the month of June. The final estimate of the region’s consumer prices would be closely watched by market participants amid concerns that it will remain below the European Central Bank’s (ECB) 2% target. However, a moderate pick up in price growth will be a positive sign for the central bank, as it will give some time to the ECB to monitor the impact of last month’s EU referendum. Elsewhere, the ECB supervisor, Ignazio Angeloni, stated that enormous levels of bad debts pertaining to Italian banks can be managed but should not be underestimated and added that the problem was not specific to Italy. Additionally, he mentioned that the Atlante bailout fund, set up recently to support Italy's banking system, lacks sufficient firepower to address all the issues surrounding the nation’s lenders.
Going forward, the ECB’s crucial interest rate decision scheduled next week will determine the direction of the Euro.
Other Currencies – Highlights
The Australian Dollar reversed its previous session gains and is trading lower against the greenback this morning. Earlier in the session, data showed that unemployment rate in Australia edged up for the first time in five months in June, meeting market expectations. Moreover, the Australian economy added a lower number of jobs than anticipated in June, with a rise in full time jobs, while part time employment dropped. Further, a private survey indicated that consumer inflation expectations advanced in July. Looking ahead, market participants await the release of NAB business confidence and Westpac leading indices along with RBA’s meeting minutes, due next week.
Elsewhere, in China, Australia’s largest trading partner, the economy expanded slightly higher than expected in the second quarter of 2016, showing that stimulus introduced in the first quarter has revived growth in the world’s second largest economy. Additionally, the nation’s industrial output unexpectedly advanced in June, while retail sales grew more than expected on an annual basis in the same month.