Spotlight on Second Quarter US GDP Report
With a thin economic calendar day in the UK, trading in Sterling is likely to be driven by global macro economic and political developments. Going forward, a consumer confidence report by the GfK group scheduled early tomorrow could spur gains in the Pound if the print surprises to the upside, as improving wage growth in recent months might possibly have shored up confidence.
Across the Atlantic, the initial estimate of second quarter GDP will be published later in the day, amid wide optimism that the economy has recovered strongly having been adversely affected by a harsh winter in the first quarter. In Europe, German consumer prices data and economic and business sentiment reports in the Euro zone are slated for release in a short while.
Pound Sterling – UK Markets
Yesterday, the distributive trades survey from the CBI showed that UK annual retail sales growth in July slowed for the second consecutive month after hitting a five-month high in May. The retail sales balance unexpectedly fell for July, despite warm weather boosting clothing sales to rise at its fastest annual rate since January. The overall figure was weighed down by grocers and department stores, which experienced flat sales volumes. Moreover, survey data indicated that sales volumes were anticipated to weaken further next month. This data has cast doubts on the sustainability of robust economic growth in the nation, despite preliminary GDP data earlier this week suggesting that the UK economy is back on track in the second quarter following a dismal first quarter. The Pound surrendered its gains against the US Dollar yesterday, while it managed to trade broadly higher against the other majors.
Sterling is looking for direction against the US Dollar this morning, amid an absence of significant macroeconomic indicators to influence trading in the Pound. Looking ahead, investors will eye UK’s consumer confidence report by GfK, scheduled tomorrow, for direction.
US Dollar – US Markets
The US Dollar is trading higher against the Euro this morning, as investors look forward to US GDP data that could reinforce hopes that the Fed is on course to raise interest rate in the coming months. The first estimate of second quarter US GDP is scheduled for release later in the day, with markets anticipating the economy to have rebounded strongly in the April to June period from severe weather and West Coast port labour disputes that had depressed the economy early this year in the first quarter. Consumer spending is likely to have boosted economic growth in the second quarter, in the wake of cheaper gasoline prices, robust job market, improvement in wage growth and low borrowing costs. Also of interest will be the personal consumption expenditure data for the second quarter, amid signs that inflationary pressures have accelerated recently.
Yesterday, the US Fed offered no explicit clarity on the timing of raising the benchmark interest rate in its policy statement, even as it expressed an upbeat view of the labour and housing markets. It indicated that it would like to see signs of higher inflation before raising rates.
Euro – European Markets
The Euro - US Dollar currency pair has slipped below the 1.10 mark early this morning, as the shared currency retreated across the board ahead of a string of notable economic releases scheduled in a few hours. Among the major macroeconomic prints today, Euro zone’s economic sentiment index is expected to tick slightly lower for July, while the services and business conditions indicator is expected to maintain its elevated levels. Meanwhile, sentiment across the industrial sector is anticipated to remain weak. Additionally, the German preliminary CPI print for July is also due for release today is eagerly awaited to gauge the inflationary pressures in the Euro zone’s largest economy, amid recent stabilization in gasoline prices.
The first estimate of Spain’s second quarter GDP data showed that pace of economic growth was in line with expectations, while the Spanish CPI figures indicated lack of price pressures in the nation. In employment news, the jobless rate in Germany for July remained steady at the same rate recorded in the previous month.
Other Currencies – Highlights
In Australia, data released earlier today showed that building approvals fell well below the market estimated fall in June, led down by a steep drop in the approvals for apartments, which tend to come in the form of large projects. Additionally, Australia’s export prices continued to fall in the second quarter of this year, largely driven by a drop in iron ore, coal and natural gas prices. The Australian Dollar, which was trading strong initially against the US Dollar, despite the dismal building approvals, has now given up most of its gains. The Kiwi Dollar – US Dollar currency pair has moved below the 0.73 mark, as sentiment towards the greenback remains buoyant after the US Federal Reserve left the door open to raise interest rate as early as September, citing continued improvement in the US labour and housing markets.
Going forward, investors will keep tabs on producer prices and private sector borrowing data in Australia, due tomorrow. Going ahead today, traders will now gradually shift their attention to the preliminary US GDP data for the second quarter, scheduled later in the day, for further direction in the currency pair.