Markets Anticipate UK GDP Release
Amid a light domestic calendar day, market participants look forward to a gauge of industrial orders in the UK scheduled later today for early cues about the health of Britain’s manufacturing sector. Tomorrow, the spotlight will be on UK’s second quarter preliminary growth numbers. Markets anticipate strong economic recovery in the previous quarter, considering the hawkish sentiment shift in minutes of the last monetary policy meeting and the recent positive trend in economic data.
In Europe, the Ifo business climate and expectations index came in higher than market expectations for July, boosting optimism about the health of the Euro zone’s largest economy. Across the Atlantic, key durable goods data is scheduled later today.
Pound Sterling – UK Markets
On Friday, the Pound - US Dollar currency pair recovered most of its early losses and edged above the 1.55 mark in the later part of the trading session, despite a broad based strength in the US Dollar.
In a somewhat muted day for UK economic releases, investors will keep a tab on the Confederation of British Industry’s industrial order survey data, scheduled shortly. The release would shed light on the effects of Sterling’s appreciation on the nation’s industrial export orders. Going forward, the widely awaited Britain’s second quarter GDP print, scheduled tomorrow, will draw significant market attention. With a gamut of survey data between the April to June period suggesting improvement in consumer spending and a surge in both the dominant services sector and industrial production, the GDP release is expected to show that recovery in the nation’s economy picked up momentum in the second quarter. However, last week’s tepid retail sales data for June is likely to have made traders cautious about consumers’ recent spending habits and created uncertainty about the nation’s growth outlook.
US Dollar – US Markets
The US Dollar is trading on a weaker footing against the major currencies this morning, ahead of the key durable goods orders data, scheduled later today in the US. Markets anticipate that orders for US durable goods rebounded in June on the back of robust demand for commercial aircraft. Also, demand for capital goods orders excluding transportation is estimated to have increased, as the latest PMI and Chicago Fed manufacturing data have indicated moderate improvement in overall business conditions across the manufacturing sector. Also on tap will be the Dallas Fed manufacturing index, which is expected to add more evidence to the perception of improving manufacturing activity in the US. Going forward, the FOMC’s interest rate setting meeting and preliminary second quarter GDP data due this week will attract significant market attention.
The US Dollar surrendered early gains against its major currency counterparts on Friday, after sales of new single family homes in the US unexpectedly dropped in June to its lowest level in seven months.
Euro – European Markets
Euro zone’s largest economy is in focus this morning with updates from a closely watched survey indicating upbeat business investor sentiment in Germany. The Ifo business climate, current assessment and business expectations indices surpassed market expectations for July, indicating improved optimism in Euro zone’s largest economy, as earlier concerns about Greece’s exit from the currency union receded after a compromise agreement was reached between the Greek government and its international creditors about two weeks back. The shared currency picked up momentum earlier today and is currently trading on a firmer footing against the US Dollar and the Pound.
Though uncertainty surrounding Greece seems to be abating, market participants still continue to monitor key developments concerning the cash strapped nation for direction. The Greek government is scheduled to begin talks with its international creditors later today to secure a third bailout package to fulfill its debt obligations to the ECB before the hard deadline due late next month.
Other Currencies – Highlights
The Australian Dollar has trimmed part of its losses against the US Dollar this morning, as sentiment towards the greenback remained weak following last week’s disappointing new home sales figures in the US. However, gains in the Australian Dollar are expected to remain limited, as concerns surrounding the health of the Chinese economy, following the recent weak manufacturing data, continue to pressurise the commodity linked currency.
On Friday, the Australian Dollar - US Dollar currency pair dropped to multi year lows, affected by falling oil and gold prices and as investors responded to tepid Chinese manufacturing data. With the Reserve Bank of Australia leaving the door open for further easing, the sharp fall in commodity prices has raised the probability of the RBA slashing benchmark interest rate further in the near term. On the macro front, Australia’s economic calendar for this week looks light, with only building permits, producer prices and private sector credit data scheduled later in the week. Until then, economic developments in the major economies will influence trading in the Australian Dollar.