Hammond Says No Tax Cuts After Brexit
Philip Hammond seems to reject the idea of cutting taxes and regulations post-Brexit in order to help Britain compete with its European Union (EU) rivals. The Chancellor told Le Monde that the UK will remain “recognisably European” after its departure from the EU. Earlier in the year, Hammond had said that the UK will do whatever is necessary to remain competitive in the global market.
Brent crude oil prices jumped to almost $53 per barrel, which is a two-month high, as reports published said that the US government is considering imposing sanctions on Venezuela. During the weekend, US officials expressed their anger over a controversial election held in the Latin American country. Violent clashes between the police and supporters of the opposition led to the deaths of three people.
Pound Sterling – UK Markets
Today, Sterling slumped against the US Dollar, with the exchange rate set at $1.31. The Pound lost a bit of ground against the Euro, with the exchange rate set at €1.11. The Bank of England (BoE) published data regarding mortgage approvals and lending in the UK for June.
Data showed that, in June, the number of mortgage approvals hit a nine-month low, recording a drop from May’s figure and coming below analysts’ expectations. The reduction in the number of approvals was attributed to consumers’ lack of confidence and their squeezed incomes. Economists suggested that the data points to house prices remaining flat in the next six months, rather than falling.
The BoE is relieved to see the consumer credit growth, on a yearly basis, dipping to 10%, which represents a thirteen-month low. The figure came slightly lower than the 10.4% recorded in May and April, but it is still considered higher than the BoE’s target. According to data, consumer credit accounts for the 19.7% of the average UK household income, with most of it coming from personal loans and overdrafts.
US Dollar – US Markets
The US Dollar edged up against the Euro, with the exchange rate set at €0.85. The US Dollar Index (DXY), which measures the value of the Dollar against six major currencies, also moved higher today, after hitting a ten-month low in the previous week.
The US economy appears to have accelerated in the second quarter of the year, thanks to stronger consumer spending, according to preliminary data released by the Commerce Department. However, market experts suggest that the Fed should be very concerned about the persistently low wage inflation. The survey indicated that the real wage growth remained weak in both the services and the goods sectors.
A new test-firing of an intercontinental ballistic missile by North Korea ignited a reaction by the US president, Donald Trump, who accused China, on Twitter, of “doing nothing for us with North Korea. China could easily solve this problem.” Defence analysts believe that the new missile has the ability to hit, at least, half of the continental United States. Trump talked to the Japanese prime minister, Shinzo Abe, and assured him that the US will take all necessary measures to protect its allies from the North Korean threat. The US ambassador to the United Nations (UN), Nikki Haley, said that there is no reason calling for a UN Security Council meeting if it doesn’t significantly increase pressure on North Korea.
Euro – European Markets
The Euro weakened against the US Dollar, with the exchange rate set at $1.17. Eurostat released data regarding the inflation and unemployment in the Eurozone, which seemed unable to boost the single market currency.
Unemployment across the Eurozone bloc came at 9.1% in June, a bit lower than the 9.2% recorded in May. The figure is an eight-year low. It’s the first time that Eurostat has recorded such a low figure since the financial crisis erupted in Europe. In the European Union, the unemployment rate came at 7.7%, which is stable and at the lowest level since the last month of 2008. Inflation in the Eurozone, in July, remained stable at 1.3%, which is much lower than the ECB’s target of 2%.
In Germany, retail sales in June, on a year to year basis, came at 1.5%, which was far less than the 2.7% that the market was expecting. On a monthly basis, the German retail sales in June came at 1.1%, a much better figure than the 0.2% anticipated. Sabine Lautenschlaeger, who is a European Central Bank (ECB) board member, said that the bank should begin discussions over the QE exit strategy. The German former vice president of the Bundesbank said that “as time passes the positive effects of the expansionary monetary policy get weaker and the risks are increasing.”
Other Currencies – Highlights
The Pound retained its value against the Australian Dollar, trading at 1.64 AUD. The Aussie suffered from the fact that the Chinese services and manufacturing PMIs missed expectations. Usually, the Australian currency is affected by hiccups in the Chinese economy, since the two countries have strong trade bonds. Tomorrow, the Reserve Bank of Australia (RBA) will announce its decision regarding its benchmark interest rate. Analysts expect the RBA to keep it on hold at 1.5%.
Sterling strengthened against the New Zealand Dollar, trading at 1.75 NZD. Tomorrow, the labour market data is going to be released, with market experts expecting that the unemployment rate is going to remain unchanged at 4.9%. A report by Westpac says that larger gains in employment are expected in the services sector and retail. A second report by the same bank showed that New Zealand’s residential building consent issuance fell 1% in June, after having recorded a 7% rise in May.