The Eurozone and the US Take Centre Stage Today
This week ends with the release of an important set of data points from both the Eurozone and the US. A slew of economic releases from the Euro region have already seen the light of the day. Germany, the Eurozone’s largest economy, kick started the day with a couple of optimistic data points. A final reading of German consumer price index (CPI) grew in line with investor expectations in July and the nation’s gross domestic product (GDP) advanced more than anticipated during the second quarter of this year. In a few hours, a preliminary reading of the Eurozone’s second quarter GDP along with the region’s industrial production data for June will be out.
In the UK, the just out data showed that annual construction output declined further in June. Later in the day, investors will divert their attention towards the US as they await the nation’s retail sales and consumer sentiment index data.
Pound Sterling – UK Markets
The Pound has extended its previous session losses against the shared currency this morning. The just out data showed that UK’s construction output declined in June. The indicator has witnessed four declines in the past five months. Looking ahead, there are a string of economic data points scheduled for release in Britain next week. This includes the nation’s consumer price index, retail sales, public sector net borrowing and the ILO unemployment rate data for the three months ended June.
Yesterday, Sterling dropped to a one-month low level against the greenback, amid a broad-based strength in the US Dollar and as more signs of weakness in UK’s housing market increased concerns about the post-Brexit British economy. It all started after the nation’s RICS house price balance index registered its lowest reading since April 2013 in July. Post this, credit rating agency Moody’s also contributed to the gloom by releasing a report which indicated that UK’s commercial real estate sector would be affected negatively by the Brexit vote.
US Dollar – US Markets
The greenback is trading on a weaker footing against its major peers this morning, with market participants remaining cautious ahead of key US retail sales and the Reuters/Michigan consumer sentiment index data scheduled later today for latest cues about the world's largest economy. Traders will closely gauge retail sales data following the second quarter’s strong retail growth which is expected to have been carried over into the start of the third quarter. An upbeat figure would suggest that the economy is robust enough to withstand further monetary tightening.
Yesterday, macroeconomic data indicated that the number of Americans filing for new jobless benefits declined last week, remaining below the 300K threshold for the 75th straight week, highlighting strength in the US labour market. Other economic data showed that US import prices unexpectedly inched up in July, marking its fifth straight monthly increase despite a downturn in fuel prices, thereby signaling that firmer inflation may be on the cards in the near term. Additionally, export prices edged up on a monthly basis in July.
Euro – European Markets
The shared currency is trading higher against its major peers this morning as it found support from the good news that came out of Germany today. Data showed that the final reading of German consumer prices grew in line with market expectations in July. On an annual basis, CPI rose to a six-month high level in July. Moreover, the nation’s second quarter GDP rose by double the pace expected, backed by increased exports by German firms. This will help maintain overall confidence in Germany’s economic outlook. Meanwhile, Spanish consumer prices dropped as expected in July. On the other hand, Italian flash GDP came in flat during the second quarter of this year.
Going ahead, market participants await the Eurozone’s two very important data points, scheduled for release in a few hours. The region’s preliminary GDP growth for the second quarter is expected to remain steady, and the Eurozone’s industrial production data is also up for release today which is expected to post a rebound in June.
Other Currencies – Highlights
The Australian Dollar is trading weaker against the US Dollar this morning. Earlier in the session, data showed that in China, Australia’s largest trading partner, three key indicators across the construction, industrial production and retail sector fell short of expectations in July, suggesting that the world’s second largest economy remains in the doldrums. China’s retail sales growth sharply slowed in July, a disappointing sign as the nation’s policymakers have their hopes set on consumer demand to push up growth. Additionally, China’s industrial production rose less than expected last month. Moreover, the nation’s fixed asset investment, a proxy for expenditure on infrastructure and property, grew at its slowest pace in over sixteen years in July. Separately, a private gauge of consumer inflation expectations in Australia weakened in July, justifying the Reserve Bank of Australia’s (RBA) recent decision to ease monetary policy.
Going ahead, Australia’s unemployment rate and the Westpac leading index data, along with the Reserve Bank of Australia’s August meeting minutes, are all scheduled to release next week.