Focus on BoE Minutes This Week
Key domestic events scheduled during the week are likely to have a major influence on the Pound during the upcoming trading sessions. The BoE minutes will be in focus for greater clarity on the future course of interest rates in the UK. Meanwhile, retail sales data will be eyed in order to evaluate the impact of benign inflation and upbeat wage growth on consumer spending.
In Europe, fears of Greece leaving the currency bloc have dissipated markedly, as the nation seems poised to secure fresh funds after the region’s policymakers struck a new bailout deal last week. Across the Atlantic, traders continue looking for cues on the possible stance that the Fed is likely to adopt in the coming months.
Pound Sterling – UK Markets
The British Pound maintained its recent gains and hovered close to the 1.56 mark against the US Dollar, while it ceded some ground against the single currency. Sterling notched up sizable gains against its peers last week after the BoE Governor, Mark Carney, hinted that interest rates could rise at the turn of this year. Against this backdrop, the minutes of BoE’s monetary policy meeting scheduled for release mid-week will be closely scrutinised in order to ascertain if other members in the MPC agree with the Governor’s views.
In the absence of any major domestic economic releases today, the Pound is likely to be influenced by other external developments during today’s trading session. Data from Rightmove showed that average asking price in the UK rose slightly during the current month. Among other noteworthy economic releases during the week, retail sales figures will be watched closely in order to gauge if better weather during the previous month supported sales growth. Meanwhile, tomorrow’s public finances figures will attract increased attention in light of the recent budget.
US Dollar – US Markets
The greenback has begun the weekly trading session on a mixed note. This follows last week’s gains after the Fed Chief’s affirmation of higher interest rates during the course of 2015 enticed traders to seek exposure to the greenback. Moreover, last week’s CPI figures showed that inflation in the US accelerated in June, further offering leeway for the central bank to normalise interest rates in the coming months.
However, the Reuters/University of Michigan consumer confidence survey, a key leading indicator of consumer spending, displayed signs of weakening consumer morale, thus leaving doubts on whether the US economy could witness a sustained revival following the soft patch seen in early-2015. With no major domestic economic releases today, the US Dollar is likely to be influenced by external cues during the course of today’s trading session. For the week ahead, upcoming housing sector releases will be closely watched, especially with mortgage rates hovering close to their highest levels this year.
Euro – European Markets
The Euro has staged a recovery in the morning session. This follows last week’s bailout agreement between Greek government and its European counterparts and its ratification by the Greek parliament. Greek banks reopened with the ECB increasing the emergency liquidity assistance for the nation’s banks, however, capital controls still persist. Although the Greek bailout deal appears almost sealed, traders are likely to continue to monitor key developments on this front during the week. Among them is the second Greek parliamentary vote mid-week on reforms proposed by the nation’s creditors. Separately, during the course of today’s trading session, Greece is expected to make a €4.2 billion loan repayment to the ECB using funds from a loan offered by its lenders.
With fears of “Grexit” steadily subsiding, the focus shifts to monitoring upcoming economic data in order to decipher the impact of the recent developments on the region’s economic growth. The PMI updates scheduled for release during the final trading session of the week are likely to aid in assessing the effect of the recent turmoil in Greece on the Euro zone’s private sector.
Other Currencies – Highlights
The Kiwi Dollar has arrested last week’s sharp decline against the majors this morning after New Zealand’s Prime Minister, John Key, indicated that the Kiwi Dollar had fallen faster than expected. Additionally, data released overnight showed that services sector activity in New Zealand improved for June. This is line with last week’s report which showed that activity in the nation’s manufacturing sector rose for June. Today’s comments and encouraging data have provided much needed relief to investors, especially after the domestic currency suffered losses last week following a sharp decline in milk powder prices at the Global Dairy Trade auction.
Going forward this week, most of the market attention will be focused on the Reserve Bank of New Zealand’s monetary policy meeting. Market participants anticipate a 25 basis points reduction in the benchmark interest rate to 3%. Also, there will be increased interest in the policy statement to decipher the central bank’s action plan going forward, especially with regards to the measures to be undertaken to prop up the dairy industry, the country's biggest export sector.