Janet Yellen’s speech in the spotlight
Amid a data-quiet trading session across the globe today, the US Federal Reserve (Fed) Chairwoman, Janet Yellen’s speech about the US economic outlook and monetary policy at the World Affairs Council of Philadelphia's luncheon, will be the cynosure of all eyes. Investors are keen to find out the Fed Chief’s interpretation of last week’s abysmal US labour market data and how she intends to reconcile the recent hawkish tones of her US Fed colleagues before a media blackout takes effect ahead of the June 14-15 monetary policy meeting. Meanwhile, in Britain, investors await the BRC retail sales index data, due overnight.
In the Euro zone, the just out Sentix Investor Confidence Index posted a more than expected rise in June. Separately, German factory orders fell more than expected in April.
Pound Sterling – UK Markets
The Pound is trading lower against the US Dollar and the shared currency this morning after the latest European union (EU) referendum poll results suggested rising possibilities of Britain voting to leave the EU. Looking ahead, the British Retail Consortium’s (BRC) retail sales monitor report for May, is scheduled for release overnight. Expectations are for the indicator to rebound after posting two consecutive declines. Going further, no other key UK data is expected to be released until Wednesday’s session, which will see the release of Britain’s industrial and manufacturing production reports for April, as well as the NIESR’s gross domestic product estimate for the three months ended May.
On Friday, Sterling recorded the second consecutive gain against the greenback amid a broad weakness in the US Dollar, following the release of disappointing jobs data in the US. Additionally, closer to home there was another reason to rejoice, as the UK’s services PMI witnessed a better than expected increase and bounced back from a three-year low level in May.
US Dollar – US Markets
The greenback lost ground against its peers on Friday, as the release of a downbeat US nonfarm payrolls data for May threatened the possibility of a June interest rate increase. The US economy created the fewest jobs in more than five years, as employment in the nation’s manufacturing and construction sector dipped sharply, thus putting a stumbling block in the Fed’s rate increase path. Meanwhile, the US unemployment rate fell more than expected to 4.7% in May, the lowest since 2007. However, the upbeat unemployment rate print failed to bring a smile on the American visage, as the surprise drop was because many disheartened people stopped looking for jobs and thus dropped out of the labour force in May. Perhaps, the only report which continued to show signs of life in May was wage growth, as the nation’s annual average hourly earnings grew in line with investor expectations.
Moving ahead, investors will closely watch the US Fed Chairwoman, Janet Yellen’s speech, due later today, for further insights into the timing of the central bank’s next rate move.
Euro – European Markets
The shared currency is trading mixed against the US Dollar and the Pound in the morning session. The just out data showed that the Euro zone’s Sentix Investor Confidence Index advanced to a 1-year high level in June. Earlier, data showed that German factory orders dropped more than expected in April, dragged down by a decline in foreign orders.
On Friday, the Euro surged to a 3-week high level against the greenback amid a broad slump in the US Dollar, following the release of disappointing headline US nonfarm payrolls and weaker than expected ISM non-manufacturing PMI figures for May. On the domestic data front, Euro zone retail sales by volume stagnated in April from March, while growth on an annual basis unexpectedly slowed down. Separately, Germany’s Bundesbank slashed its German growth forecast for this year and the next, citing poor export demand. Nevertheless, the central bank assuaged investor concerns by stating that Germany’s robust underlying economic trend and strengthening labour market along with rising household income will continue to underpin domestic spending in the nation.
Other Currencies – Highlights
The Aussie Dollar surrendered its earlier session gains and turned lower against the greenback this morning. Data released early this morning showed that a private gauge of Australia’s inflation turned negative in May. Moving ahead, investors await the release of Australia’s AiG Performance of Construction Index for May, due overnight. After pointing to contraction for four straight months, the index pushed above the 50-level threshold in April. Additionally, traders of the Aussie Dollar – US Dollar currency pair will scrutinise remarks from the Fed Chairwoman, Janet Yellen, scheduled later today. Early tomorrow morning, the Reserve Bank of Australia (RBA) is scheduled to announce the benchmark interest rate decision and publish its rate statement. At its meeting last month, the RBA cut the key interest rate to a record low level due to alarmingly low inflation in the country. However, the nation’s latest robust GDP figures are expected to keep the central bank on hold tomorrow.
Earlier in the session, the Aussie Dollar sharply rose higher, as the greenback plunged on weak US jobs data.