UK Construction Growth Slows in July
Data just released indicated that activity in Britain’s construction sector expanded at a slower than anticipated pace for July, hurt by a loss of momentum in house building activity. Meanwhile, mortgage lender Nationwide earlier today reported that house prices in the UK rose last month, in line with expectations, after a fall in June, amid tentative signs that growth in the nation’s housing market might be stabilising.
Amid a light calendar day in Europe, Euro zone producer prices data will be on investors’ radar. Across the Atlantic, economic data scheduled later in the day is expected to show that US factory orders rose in June after being in the red in the previous two months.
Pound Sterling – UK Markets
The just released construction data signalled a slight deceleration in the sectors activity for July, following the robust expansion witnessed in the sector since May 2015. Growth in the UK construction industry slowed unexpectedly for July, reflecting an easing of the surge in confidence among businesses in the sector that underlying demand will continue to recover. The survey data revealed that a loss of momentum in the UK construction sector was partly due to slower house building activity in the nation. Sterling has managed to hold on to its earlier gains following the latest construction PMI numbers and is trading in a close range against the US Dollar this morning. The BoE’s monetary policy committee gathering later in the week could spur further gains in Sterling if some of the members adopt a hawkish tone.
Nationwide’s report released earlier in the day indicated that house prices in the UK rebounded as expected for July, amid shortage of properties in the UK residential market.
US Dollar – US Markets
The US Dollar has lost ground against the Euro this morning. With limited data on tap today to influence trading in the US Dollar, market participants will keep a tab on US factory orders data scheduled later in the day for further direction. Markets anticipate factory orders to rise in June, following two straight months of falling orders. However, yesterday’s soft ISM reading for July has casts doubt on the manufacturing sector’s growth outlook and slightly dampened optimism about the strength of the economic recovery after a sluggish run in the first half of the year. If today’s print of factory orders comes in above expectations, the upbeat data would provide fresh perspective on the performance of the industrial sector in the third quarter.
As the week progresses, a plethora of notable economic releases in the US could trigger volatility in the US Dollar against the major currency pairs. With the Fed hinting at slack in the US labour market, of particular importance would be the July non-farm payrolls due in the final session of this week.
Euro – European Markets
The shared currency is trading on a firmer footing against its major currency counterparts this morning. The European economic calendar remains light today, and investors will keep a tab on Euro zone’s producer prices data, scheduled in a short while, that could influence trading in the Euro against its key peers. Although Euro zone’s consumer inflation has returned to a slightly positive territory in recent months, deflation risks continues to weigh on the industrial sector. Today’s producer prices data will offer another context to gauge the pace of economic recovery in the Euro region.
The Euro lost some appeal against the US Dollar in yesterday’s trading session, as turmoil in the reopened Greek stock market weighed on investor sentiment. Events in Greece are likely to continue to impact trading in the common currency against the majors, especially as the date for the cash strapped nation’s next repayment to the European Central Bank looms ahead. Meanwhile, the better than expected Euro zone’s manufacturing data for July in the previous session helped to offset some risks associated with Greece’s crisis.
Other Currencies – Highlights
The Australian Dollar – US Dollar currency pair picked up momentum and rallied well above the 0.73 mark after RBA’s interest rate decision meeting earlier today. The RBA left its interest rate unchanged at its monetary policy meeting as widely anticipated. However, there was a marked shift in the tone of the central bank’s policy statement, which had earlier repeatedly emphasized on the need for further depreciation in the Australian Dollar given the sharp drop in commodity prices recently. In its August policy statement, the RBA tweaked its language substantially and indicated that the Australian Dollar is adjusting to the significant declines in key commodity prices.
The Australian Dollar had staged a recovery from its previous session losses even prior to the RBA decision, following the release of better than expected retail sales and trade balance figures. Official figures showed that retail sales surpassed market estimates for June, while Australia’s trade deficit unexpectedly narrowed during the same month.