German economy in the spotlight today
Germany’s economy will come under the focus lens today, with the ZEW economic survey numbers for July pegged for release. This will help corroborate the German Bundesbank’s viewpoint about the economy. The Eurozone economic sentiment index and construction output data are due for release today, along with the International Monetary Fund’s latest update on world economic outlook, which will definitely include an analysis of post-Brexit impact on the global economy.
In the UK, the just out data showed that the nation’s consumer price index (CPI) rose more than expected on an annual basis in June. Across the Atlantic, after a busy Friday, the US economic calendar has calmed down a bit, with only the Tier 2 housing starts figures and building permits data scheduled for release today.
Pound Sterling – UK Markets
Sterling is on a defensive mode today, erasing its previous session gains against the US Dollar and the Euro this morning. The just out data showed that UK’s CPI rose above expectations over the year in June. The core CPI also came in better than expected. Further ahead in the session, investors will be interested to know the results of the BoE’s latest indexed long-term repo operation, which will shed light on the demand for liquidity from British financial institutions. Additionally, the BoE Deputy Governor, Ben Broadbent, is scheduled to testify before the Economic Affairs Committee today.
Yesterday, the Pound found some renewed support against it major peers after the BoE Monetary Policy Committee member, Martin Weale, played down talks of an interest cut next month. He stated that it appears too early to judge the impact of Brexit on the UK economy and that it would be prudent to wait for more evidence before voting for additional stimulus.
US Dollar – US Markets
The US Dollar ended lower against the shared currency and the Pound in the previous session. The National Association of Home Builders housing market index data was the sole economic release in the US yesterday. The report showed that the nation’s housing market index unexpectedly declined in July. Nevertheless, the index has been confined to narrow ranges throughout this year and continues to suggest firm underlying confidence in the US housing sector.
Going ahead, some more US housing market data is on the wire today. The nation’s housing starts ticked lower in May, however market participants expect a rebound in the June result. Apart from this, new applications for US building permits, which acts as a bellwether for forthcoming construction activity, is also up for release today and is expected to post an increase. Looking further ahead into this week, more housing sector related data will be unveiled in the form of housing price index and existing home sales. Additionally, US manufacturing and weekly jobless claims data are also scheduled for release.
Euro – European Markets
The shared currency is trading mixed against the greenback and the Pound this morning. Looking ahead, the German ZEW economic sentiment index is due for release in a few hours. The index had recorded a jump in business sentiment for June, but that was pre-Brexit. This month the index is expected to decline sharply, in fact a drop to negative ground cannot be ruled out. Meanwhile, the Eurozone’s economic sentiment index is also likely to record a drop in July. In addition to this, the Euro region’s construction output data for May is also up for release today.
Yesterday, the Euro ended higher against the US Dollar, despite the absence of any major market moving economic releases from the Eurozone. The shared currency gained strength as market participants were widely expecting monetary policy to be left unaltered at the upcoming European Central Bank meeting. Separately, Germany’s Bundesbank dismissed concerns regarding Brexit and gave assurance that the nation will continue to expand strongly in the third quarter.
Other Currencies – Highlights
The Australian Dollar hit an 11-day low level against the greenback this morning, even though the Reserve Bank of Australia’s (RBA) July meeting minutes did not provide any hint of an August easing. The central bank emphasised that its monetary policy does not follow a preset course and is entirely data dependent. The minutes revealed that the board officials are awaiting further information on growth and inflation in Australia before deciding on whether to tweak the monetary policy. Further, the RBA reiterated that an appreciation in the domestic currency could complicate economic adjustments. Looking back at the July meeting, the board had retained its record low interest rate of 1.75% for the second straight month.
Separately, Malcolm Turnbull was sworn in as Australia’s Prime Minister for a second term today following a narrow election victory. Going ahead, Australia’s Westpac leading index for May and the NAB business confidence index for the second quarter is scheduled for release this week.