Eurozone and US Q2 GDP data to Attract Attention
This week closes with a bang. A plethora of economic data points across the globe are up for release today. The day began with German retail sales posting a drop in June. Further, French GDP stagnated in the second quarter. Going ahead, the Eurozone consumer price index and GDP for the second quarter will be on investors’ radar.
In the UK, the just out data showed that consumer credit surprisingly advanced, whereas mortgage applications fell more than expected in June. Across the Atlantic, market participants will confront the release of the US preliminary second quarter GDP, employment cost index, Chicago PMI and revised reading of the Reuters/Michigan consumer sentiment index.
Pound Sterling – UK Markets
The Pound has extended its losses against its major peers this morning. The just out data showed that UK’s mortgage approvals declined to a one-year low level in June, while consumer credit unexpectedly rose in the last month. Earlier in the session, British consumer morale suffered its steepest drop in more than 26 years in July. Market research firm GfK’s gauge of consumer confidence fell more than expected in the wake of Britain’s surprising vote to withdraw from the European Union, as the British became increasingly pessimistic about their personal finances and the nation’s economic outlook. On the other hand, Lloyds business barometer advanced in July after registering a sharp drop last month.
Next week will be very crucial for the UK, as the Bank of England (BoE) policymakers are scheduled to hold the monetary policy meeting where they will decide whether more stimulus needs to be injected into the economy. The latest string of disappointing data releases has given rise to speculation that the central bank will come up with an aggressive easing response.
US Dollar – US Markets
The US Dollar is trading mixed against the Euro and the Pound this morning, as investors continued to assess the US Federal Reserve’s decision to keep key interest rate unchanged at its latest monetary policy meeting.
In other economic news, data released yesterday showed that the number of people filing for fresh unemployment benefits in the US rose more than forecast last week, thus maintaining underlying confidence in the nation’s labour market, as market participants look forward to next month’s jobs report. Meanwhile, US goods trade deficit moved further widened in June, driven by stronger import growth. Going forward, US Q2 annualised GDP data scheduled later today will keep investors nervous, after the Atlanta Fed trimmed its growth estimate to 1.8% from its previous projection of 2.3% released a day earlier. Nonetheless, the second quarter growth data may throw light on whether the US economy has rebounded or not from a first quarter slump.
Euro – European Markets
The Euro is trading higher against the greenback and the Pound this morning. Data released earlier during the session showed that German retail sales declined in June, but maintained a solid momentum on an annual basis. Meanwhile, French GDP stalled in the second quarter, as households held off spending and companies delayed investment, amid strikes and violent street protests over a contested labour law that led to major disruptions. On the other hand, French harmonised reading of annual price changes, the European Central Bank’s preferred gauge, advanced to its highest level since June 2015 in July. Separately, Italian unemployment rate surprisingly rose in June. Going ahead, investors await the release of the Eurozone’s consumer price index, unemployment rate and the flash second quarter GDP data.
Yesterday, the Eurozone’s economic and business confidence unexpectedly improved in July, as the economy showed no signs of waning despite Brexit woes. Also, German consumer prices increased for a third straight month in July, while the annual inflation figure notched its highest level since January this year.
Other Currencies – Highlights
The Bank of Japan (BoJ) has done it again!! The central bank which is notorious for pulling out surprises managed to stun markets yet again this morning. The BoJ made just small adjustments to its stimulus package, yielding to pressure from the government and financial markets for bolder action, but disappointing market participants who had expected a huge boost to its arsenal. The central bank maintained its current negative interest rate and bond buying programme, but doubled its purchases of exchange traded funds. The Japanese Yen soared against the US Dollar post the decision. The BoJ also kept global markets shrouded in suspense, by not releasing the exact time of the announcement. This way, they also sent financial markets the world over in a tizzy. Separately, Japan’s Prime Minister, Shinzo Abe, had revealed earlier this week that the nation’s government would present a ¥28.0 trillion stimulus package to reflate the Japanese economy.
Prior to the BoJ’s decision, data showed that deflation still persists in the Japanese economy and household spending figures disappointed.