Slow start to a whirlwind week
This week’s global economic calendar starts out relatively quiet, but heats up considerably towards the end of the week. Market participants will continue to peruse economic reports from the US, to gauge if the world’s largest economy is strong enough to withstand another interest rate increase later this month - spotlight is on the nation’s retail sales and inflation data. Additionally, traders will eagerly watch the Bank of England (BoE) monetary policy meeting, to see whether the central bank plans to increase monetary stimulus in the wake of Brexit.
Today, the UK and Eurozone economic data is light. Across the Atlantic, investors await a hastily-scheduled speech by the Federal Reserve (Fed) Governor, Lael Brainard, before the central bank officials go into blackout mode ahead of the Federal Open Market Committee’s meeting next week.
Pound Sterling – UK Markets
The Pound is trading mixed against the US Dollar and the shared currency this morning. The only economic release from the UK today is the CB leading index for August, which is a measure of the nation’s economic stability. The past 2 releases of the report recorded declines and market participants expect the latest reading to record a rebound. Looking further ahead, a big week is in store for Britain. The BoE’s much-awaited monetary policy meeting is scheduled to be held later this week. Additionally, a few key economic reports such as the UK’s consumer price index, unemployment rate, average earnings and retail sales, are all lined up for release this week.
On Friday, Sterling continued to face downward pressure against the greenback and ended below the crucial 1.33 mark for the second consecutive session. On the data front, UK’s goods trade deficit narrowed in July, buoyed by an increase in exports of goods and services. Separately, the nation’s seasonally adjusted construction output registered a flat reading for July.
US Dollar – US Markets
The greenback is trading on a weaker footing against the Pound and the common currency this morning. Today there are no major economic releases in the US. Meanwhile, the Atlanta Fed President, Dennis Lockhart, and the Fed Governor, Lael Brainard, are scheduled to deliver their speeches, which will be closely watched to gain fresh insights on the central bank’s interest rate outlook. Later this week, market participants will focus on the nation’s retail sales and consumer price index data.
On Friday, the US Dollar rose across the board after the Boston Fed President, Eric Rosengren, suggested that the central bank should adopt a gradual approach to raise interest rate to avoid overheating of the US economy. However, he refrained from discussing exactly when the Fed should move. On the data front, US wholesale inventories were unchanged in July, with sales recording its biggest drop in 6 months, indicating a modest boost to third quarter economic growth from inventory investment.
Euro – European Markets
The shared currency is trading higher against the greenback and the Pound this morning. The Eurozone economic calendar is devoid of any crucial economic releases today. However, data releases will slowly pick up pace as the week progresses. A speech by the European Central Bank President, Mario Draghi, is scheduled this week and is expected to attract a lot of market attention. Apart from this, German consumer price index and ZEW survey data, along with the Eurozone’s industrial production and trade balance figure, are also up for release this week.
On Friday, the Euro ended lower against its major peers following the release of downbeat trade data from Germany. The nation’s trade surplus unexpectedly narrowed in July, as exports sharply dropped, mainly due to weak demand from outside the Euro currency area. This gives rise to concerns that the export-driven German economy, also known as the largest economy in the Eurozone, is beginning to suffer from sluggish global demand.
Other Currencies – Highlights
The Japanese Yen is trading on a stronger footing against the US Dollar this morning, as a bout of risk aversion underpins the domestic currency. Data released earlier in the session showed that a preliminary reading of Japan’s machine tool orders improved in August from July. Going ahead, this week appears to be quite calm for Japan. There are only 2 other economic releases lined up for release this week in the country - the nation’s BSI large manufacturing index for the third quarter and industrial production data for July.
Japan’s machinery orders, a popular proxy for capital expenditure in Japan during the next 6-9 months, surprisingly advanced in July for the second straight month. This suggests a possible sign of recovery in the nation’s ailing economy. Japan’s Prime Minister, Shinzo Abe, has been counting on capital expenditure to drive private-sector-led growth in the country. However, business investment has been slow to pick up, mainly due to the prevailing uncertain outlook and external headwinds.