GfK says UK Consumer Confidence Eased in July
The latest survey by the GfK revealed that consumer morale in the UK slowed in July, as concerns surrounding Greece and a rise in global uncertainty weighed on consumer outlook. In the coming week, the BoE’s interest rate decision meeting along with key economic releases, including UK’s private sector activity and trade balance data, will attract significant market attention.
In Europe, inflation reading from the Euro area will dominate headlines, with markets looking for cues whether ECB’s aggressive policy measures have helped improve the pricing environment. Across the Atlantic, investors will keep a tab on a wave of economic releases including Chicago PMI, consumer confidence and labour cost index for the second quarter.
Pound Sterling – UK Markets
The Pound is trading lower against its key peers. A survey by the GfK released earlier today showed that consumer sentiment in the UK eased more than market consensus as Britons were apprehensive after Greece came close to a complete financial collapse last month. The global uncertainty led to consumers feeling less secure this month about wider prospects for the UK economy.
With little UK economic data today to influence trading in Sterling, market participants will monitor economic developments from other major economies for further direction. Going forward, BoE’s monetary policy meeting is set to take spotlight in the coming week. Though no interest rate change is expected in the BoE gathering, the vote count could expose the first split within the nine-member MPC this year with the recent upbeat trend in economic data have the rate setters leading to a division among rate setters over the timing of a raising the interest rate. Additionally, investors will eye Markit’s data on manufacturing and service sector activity in the nation, scheduled next week.
US Dollar – US Markets
The US Dollar surrendered part of its gains against its major currency counterparts this morning, as traders digested yesterday’s advance US GDP reading which missed market expectations. The US economic recovery picked up momentum in the April to June period, while the first quarter growth numbers were revised upwards to an expansion from the previously reported contraction. Moreover, the US government’s core personal consumption expenditure came in higher than expected for the second quarter, thus supporting the view that Fed officials will begin raising rates this year. The data followed Federal Reserve’s cautious though upbeat assessment of the economy in the minutes of its latest monetary policy statement. In separate data, the labour department indicated that the number of applications for unemployment benefits rose less than expected last week, adding to further evidence of improvement in the US job market.
Moving ahead, Chicago PMI, second quarter labour cost index and University of Michigan’s consumer sentiment report are slated for release later in the day.
Euro – European Markets
The Euro came under renewed pressure against the major currencies yesterday after reports emerged that Greece’s high debt levels and failure to implement reforms could disqualify the cash strapped nation to receive IMF support for the third bailout. This has fuelled doubts whether Athens and its international creditors will be able to reach an agreement over the terms of the new rescue package by the tentative deadline due late next month, which coincides with the day when Greece has to repay €3.5 billion to the ECB.
Recovering from its previous session losses, the shared currency has edged higher against its major peers this morning. Meanwhile, data released earlier in the day indicated that German retail sales contracted in June after rising in the earlier two months. Additionally, producer prices in Euro zone’s second largest economy eased, while household spending rose less than market expectations for June. Moving ahead, Euro zone’s flash CPI print scheduled in a short while will attract significant market attention and markets anticipate inflationary pressures to remain weak in July.
Other Currencies – Highlights
The US Dollar – Japanese Yen currency pair slipped below the 124.00 mark earlier today after Japan’s national CPI data showed some tentative signs that underlying price pressures in the world’s third largest economy have started to strengthen again. However, other cues were not so encouraging, including a surprise drop in consumer spending to its lowest level since last year's sales tax rise. In separate data, Japan’s unemployment rate in June unexpectedly ticked higher for the first time since April 2015.
The session was also marked by upbeat housing market data which showed that housing starts increased sharply in June and construction orders rebounded during the same period. However, these releases had limited impact on trading in the pair, and the Japanese Yen gave up most of its early gains against the US Dollar. Traders will now focus on US macro releases due later today for direction.