German Producer Prices Advance in May
While there are several economic releases across the globe this week, all eyes will be on Thursday’s European Union (EU) referendum vote. No upcoming event on the global economic or political calendar is more significant than this historic referendum.
Today’s macroeconomic calendar is relatively light. In the UK, house prices rose to a record high level in June. In the Euro zone, German producer prices advanced more than expected in May. Further ahead is the release of the Euro zone’s construction output and the German central bank’s monthly report, which contains statistical tables, speeches and analysis of current and future economic conditions from the bank’s viewpoint. It will be a quiet day across the Atlantic as there are no major economic releases scheduled for today.
Pound Sterling – UK Markets
The Pound has extended its previous session gains and continues to move higher against the US Dollar and the shared currency this morning, after a set of recent opinion polls published over the weekend showed the ‘Remain’ camp recovering its momentum. Earlier in the session, a report released by Rightmove, an online property portal in Britain, showed that asking prices for homes advanced to a record high level in June, as the nation’s housing market seemed unperturbed by the commotion surrounding the EU referendum. Separately, the International Monetary Fund (IMF) weighed in once more with its thoughts on Britain’s referendum, warning that the UK could slide into a recession next year if it quits the EU. Moving ahead, all data points in the UK are likely to be overlooked this week, as the controversial EU referendum vote will steal the thunder.
On Friday, Sterling rallied against its peers after all referendum campaigning activity remained suspended for a second consecutive day, as Britain continued to mourn the loss of a Labour Party member.
US Dollar – US Markets
The greenback lost ground against its peers on Friday. Data showed that new residential construction in the US witnessed a modest drop in May. Moreover, building permits, a bellwether of the nation’s future housing demand, missed estimates, thus dampening optimism over the health of the US housing sector. Separately, the St. Louis Fed President, James Bullard, a staunch advocate of interest rate increases, left market participants bewildered after he projected an ultra-dovish outlook, stating that the US economy might need only a single rate rise over the next two and a half years. James Bullard took up this latest viewpoint as he does not expect the US economy to pick up at a pace as earlier expected.
There are no significant economic releases in the US today. This week, the Fed Chairwoman, Janet Yellen, is scheduled to testify on monetary policy to the US Senate Banking Panel. In addition to this, the US manufacturing PMI data along with durable goods orders will keep investors engaged throughout this week.
Euro – European Markets
The single currency is trading mixed against the greenback and the Pound this morning. Data released earlier in the session showed that German producer prices rose above expectations in May, mainly led by an increase in energy prices. Going ahead, investors look forward to the release of the Euro zone’s construction output data, due in some time. Shortly afterwards, German Deutsche Bundesbank is scheduled to release the German Buba monthly report, which will provide an assessment of the nation’s economy. The bank might mention the upcoming EU referendum vote in its latest release.
On Friday, the Euro zone current account surplus notably increased in April, on the back of higher primary income. Moreover, the region’s labour costs growth accelerated for the second consecutive quarter during the three months ended March. Separately, the European Central Bank President, Mario Draghi, pleaded for European unity, as Britain prepares to vote on whether to leave or remain in the EU.
Other Currencies – Highlights
The Japanese Yen is trading lower against the greenback this morning after data released earlier during the session indicated that Japan posted a goods trade deficit for the first time in four months in May, weighed down by sluggish exports amid a slowdown in overseas demand. Exports dropped for the eighth consecutive month in May, underlining the struggle faced by the nation’s policymakers. Separately, the IMF urged the Japanese government to introduce “bold” structural reforms to rejuvenate the economy, as Japan’s inflation has ground to a virtual halt and growth continues to remain anaemic.
Going ahead, market participants await the Bank of Japan’s latest monetary policy meeting minutes, scheduled for release overnight. Further ahead, several economic releases are lined up in Japan this week, such as the all industry activity index and the Nikkei flash manufacturing PMI along with the nation’s leading and coincident indices data.