Get Set for a Barrage of Data Points Today!
The global economic calendar is jam-packed today. Crucial economic data points and events from all over the world will make market participants sit up and take note as it all unfolds. First up is the data deluge from the Eurozone and the UK. In Germany, industrial production recorded its weakest performance since August 2014 in July. On the other side of the English Channel, investors will be glued to their seats as economic releases unwind in quick succession. The just out data showed that the UK’s industrial production surprisingly rose in July. In a few hours, the Bank of England (BoE) Governor, Mark Carney, will testify before a parliamentary committee in London. Later today, the UK will face a reality check as the nation’s reputed think-tank, NIESR, releases GDP estimate for the 3 months to August.
In the US, today’s release of the Federal Reserve’s (Fed) Beige Book report might shed some additional light on the outlook for interest rate.
Pound Sterling – UK Markets
The Pound is trading lower against the greenback this morning, falling below the crucial 1.34 mark, after the UK’s factory output dropped in July at the fastest pace in a year, confirming that British factories took a hit following the Brexit vote. However, the overall industrial output surprisingly advanced in July. A vivid picture of the BoE’s future monetary policy actions might emerge today as the central bank Governor, Mark Carney, is scheduled to testify before the Treasury Select Committee. This will be his first appearance after the BoE decided to slash the interest rate and increase asset purchase last month. Fellow monetary policy committee members Jon Cunliffe, Kristen Forbes and Ian McCafferty are also scheduled to speak at the hearing. Further outlook on the UK economy will be provided today by the NIESR GDP estimate for 3 months ended August.
Yesterday, Sterling surged to its highest level against the US Dollar since mid-July, after the greenback weakened across the board, following the release of disappointing US services sector data.
US Dollar – US Markets
The US Dollar is trading on a stronger footing against the common currency and the Pound this morning. Yesterday, data showed that the US ISM non-manufacturing PMI fell to a 6-year low level in August from the previous month, undermining confidence in the nation’s economic outlook. Slower than expected expansion in the US services sector has diminished expectations of a September interest rate rise by the Fed. Meanwhile, slowing growth in key sectors of the US economy and last week’s downbeat jobs report has raised doubts in the minds of market participants that the underlying momentum of the world’s biggest economy is holding up. Also, it has complicated things for US central bank officials who were supporting a monetary policy tightening as soon as this month.
Earlier today, the San Francisco Fed President, John Williams, reiterated that the Fed should gradually start raising interest rates, preferably sooner rather than later, despite yesterday’s sluggish services sector and recent disappointing nonfarm payrolls data.
Euro – European Markets
The shared currency is trading mixed against the US Dollar and the Pound this morning. Data released earlier in the session showed that German industrial production surprisingly declined in July, reaching its lowest level since August 2014, as the nation’s manufacturing sector suffered from subdued global trade. This adds to the recent run of lacklustre data from the Eurozone’s largest economy which in turn has weakened the nation’s outlook. Earlier this week, a gauge of the nation’s private sector activity fell to its lowest level in 15 months in August. In other economic news, French trade deficit widened in July from June as imports rebounded, and their current account deficit widened during the same month owing to weak foreign trade.
Yesterday, the Euro registered its strongest level in more than a week against the US Dollar, amid a slump in the greenback, as the US services sector came in at its weakest level since 2010. On the data front, the Eurozone’s second quarter GDP growth confirmed an initial estimate published in July.
Other Currencies – Highlights
The Swiss Franc is trading higher against the US Dollar this morning, extending gains for the third consecutive session. Data released earlier in the session showed that Switzerland’s foreign currency reserves rose more than anticipated in August. Separately, Swiss economic momentum accelerated in the second quarter, blowing past market expectations. Growth was underpinned by a rise in foreign trade, government consumption and services output. However, the main domestic components continued to show signs of weaknesses, with private consumption stagnating and investments contracting in the second quarter.
Meanwhile, a separate report showed that Swiss consumer prices dropped in line with investor expectations in August, falling for the 22nd straight month. However, last month’s dip was smaller than in July, suggesting that inflation should return to Switzerland later this year. Going ahead, market participants look forward to Switzerland’s unemployment rate data for August, scheduled to release later this week.