The BoE and US nonfarm payrolls in focus this week
The twin highlights this week will be the Bank of England’s (BoE) monetary policy meeting and the US nonfarm payrolls data for July. Market participants expect the BoE to slash the interest rate to 0.25%. In the US, clarification will be provided on how the US Federal Reserve (Fed) is progressing with its dual mandate of inflation and employment, with the US personal consumption expenditure index also up for release this week.
The just out data showed that Britain’s manufacturing PMI unexpectedly dropped in July to the lowest level since early 2013, amid reports that business activity in the UK is adversely affected post the European Union referendum. Meanwhile, the Eurozone and German manufacturing sectors advanced during the same month. Later today in the US, Markit and ISM manufacturing PMI reports, along with the nation’s construction spending data, will be closely tracked for further cues.
Pound Sterling – UK Markets
The Pound has surrendered its early morning gains against the greenback after the just out data showed that the final estimate of UK’s Markit manufacturing PMI declined more than initially expected in July, hitting the lowest level since early 2013. This week’s key event in Britain is the BoE’s monetary policy meeting. The central bank is widely expected to lower the benchmark rate by a quarter point, to a historic low of 0.25%. In addition to this, market participants also expect an increase in the BoE’s asset purchase facility. On the same day as the interest rate decision, the BoE is also scheduled to release its quarterly inflation report. This upcoming report commands some extra attention, as this will be the central bank’s first inflation forecast report following the Brexit vote. Apart from this, the UK’s construction PMI, BRC shop price index and Halifax house prices data are also up for release this week.
On Friday, British mortgage approvals declined to a one-year low level, while net consumer credit unexpectedly advanced in June.
US Dollar – US Markets
The US Dollar is trading higher against the Euro and the Pound this morning. Earlier today the New York Fed President, William Dudley, suggested that the central bank should be cautious on increasing interest rates given risks pertaining to the US economy. However, he argued that it would be too soon to rule out a policy tightening in 2016 if the economy and labour markets improve quickly. Going ahead, the US manufacturing PMI data for July will be on investors’ radars.
On Friday, the greenback lost ground against its major peers after US GDP logged a less-than-expected gain during the second quarter of this year, as inventories dropped for the first time in nearly five years amid shaky global demand. The disappointing GDP growth figure indicates that the Fed would be in no hurry to raise interest rates in the near term. Other economic data showed that US consumer sentiment fell in July from June, as the upcoming US Presidential election and uncertainties about the global economy weighed on most Americans.
Euro – European Markets
The shared currency is trading mixed against the US Dollar and the Pound this morning. Data released earlier during the session showed that the final reading of the Eurozone’s Markit manufacturing PMI surprisingly rose in July. German manufacturing PMI also advanced during the same month. On the other hand, the Spanish manufacturing sector moved closer to stagnation as it fell to the lowest level since late 2013, mainly led by a fall in new orders. French manufacturing activity contracted for the fifth straight month and Italian manufacturing PMI dropped in July.
On Friday, the Euro hit a one-month high level against the greenback amid a broad-based weakness in the US Dollar following the release of downbeat second-quarter GDP data. On the data front, Eurozone economic growth halved in the second quarter after the French economy stagnated. In contrast, the region’s jobless rate remained at 10.1% in June. Moreover, consumer prices in the Eurozone rose to an eight-month high level in July as a result of higher food, alcohol and tobacco prices.
Other Currencies – Highlights
The Canadian Dollar is trading lower against the US Dollar this morning, tracking weakness in oil prices. There are no economic data points scheduled for release in Canada today. However, things will slowly heat up on the macroeconomic front as this week passes by. Tomorrow, Canada’s RBC manufacturing PMI for July is due to be released, and the nation will witness the release of some crucial economic reports towards the end of this week - this includes Canada’s international merchandise trade, unemployment rate and the Ivey PMI data.
On Friday, a pall of gloom surrounded the Canadian economy. Data from Statistics Canada showed that the country recorded its largest monthly GDP decline since March 2009, after raging wildfires in Northern Alberta affected oil production and disrupted employment. Other sectors of the economy did not fare well either, as manufacturing and utilities output also registered a decline. Separate data showed that Canada’s industrial product price index advanced above expectations, while a gauge of raw material prices rose less than anticipated in June.