UK Employment Report Anticipated
Amid the absence of significant domestic macroeconomic indicators, trading in Sterling today will be influenced by economic and political developments in the other major economies. The key release this week will likely be Britain’s employment report, wherein figures are expected to show that wage growth including bonus slowed down for the three month period ending June.
Across the Atlantic, following a strong nonfarm payrolls report on Friday, investor attention will now shift towards Atlanta Fed Chief Dennis P. Lockhart’s speech today to gauge any new signals with regard to Fed’s intention to raise its benchmark interest rate. In Europe, the just released Sentix investor confidence data indicated that investor morale in the region weakened in August.
Pound Sterling – UK Markets
The Pound is trading on a weaker footing against its key peers this morning, amid the absence of notable UK macroeconomic indicators to influence trading. This week, data from UK’s labour market will attract significant market attention, especially after the BoE in its latest inflation report, published last week, stated that wage growth is expected to continue to strengthen in the near term. Meanwhile, markets anticipate the average weekly earnings growth to slow for the three months until June on lower bonus pay, however core earnings could pick up slightly during the period. The UK labour market data is also expected to reveal that unemployment rate remained steady at 5.6% for June. In addition, BRC’s early snapshot of retail sales growth for July, housing market data and UK construction output data scheduled this week might attract some investor attention.
On Friday, Sterling traded broadly lower against the major currencies as the UK trade deficit widened again in June, albeit lower than market expectations, following continued pressure from a rapid appreciation of the Pound and weak global economic growth.
US Dollar – US Markets
The US Dollar is trading marginally higher against its key peers at the start of the week amid a light calendar day in the US and in the aftermath of the latest nonfarm payrolls report from the US economy in the final trading session of last week. The payrolls figures missed expectations for July, however the numbers were strong enough to add to belief that the US Federal Reserve could start contemplating on a sooner than expected rise in interest rate this year.
Meanwhile, the search for cues on when the Fed would raise its benchmark borrowing rate is set to intensify this week, starting with an update on the labour market conditions index scheduled later in the day. Fresh comments by the Atlanta Fed President, Dennis P. Lockhart who is also a voting member on the Fed’s policy setting open market committee, due later today would be closely monitored in light of the recent labour market data. In a speech earlier last week he had strongly hinted that the Fed was close to raising short term rates.
Euro – European Markets
The Euro – US Dollar currency pair is hovering just below the 1.1 mark this morning. On the macroeconomic front, the Sentix investor confidence survey data for August showed deterioration in sentiment, with the gauge unexpectedly dropping below market estimates despite the turmoil surrounding the Greek debt crisis in June and early July having receded. Post the resolution of the Greek crisis, traders are closely monitoring economic indicators from the region to gauge whether a sustained recovery is taking place. In the coming days, investors will keep a tab on the ZEW economic sentiment index and industrial production figures and particularly eye the final inflation reading and second quarter growth estimates due later in the week.
In more positive news, Greece has inched closer to securing a new rescue package after officials from the cash strapped nation and its international creditors reportedly agreed on a draft deal this weekend in exchange for further reforms before the nation has to repay debt obligations worth €3.4 billion to the ECB, due in ten days.
Other Currencies – Highlights
The Japanese Yen extended its losses against the US Dollar after a government survey earlier today showed that confidence among consumers in the nation worsened, with the index for July falling to its lowest level in six months. The disappointing survey result signals that households in Japan are not willing to accelerate spending yet, amid rising food prices and lackluster wage growth in the nation. Additionally, an assessment by the Cabinet Office on the short term economic trends in Japan for July did not paint an encouraging picture of the nation, fuelling further doubts on the Bank of Japan’s recent optimistic view of the economy. Going forward, minutes from the last BoJ monetary policy meeting and machinery orders data in the coming days will attract significant market attention.
Trading trends in the US Dollar – Japanese Yen currency pair today will likely be determined by labour market conditions index in the US, while remarks by Fed policymakers, Fischer and Lockhart, due later in the day, might also have some influence.