UK Industrial Output Drops plus Trade Deficit Widens
The just released data showed that UK’s trade deficit widened more than market expectations for July, led by a drop in exports of chemicals and manufactured goods. Separately, an unexpected decline in July’s industrial and manufacturing production, from the prior month, added to concerns of slowing momentum in the nation’s economic growth. Moving ahead in the session, the NIESR UK GDP estimate could attract market attention as well.
Across the Atlantic, US job openings data for July, due later in the day, will be keenly awaited by traders to gauge the health of the labour market in the USA. Additionally, a weekly update on the number of mortgage applications, as reported by the Mortgage Bankers Association, will attract some market interest.
Pound Sterling – UK Markets
Publication today of a raft of UK economic data releases has put the spotlight back on the nation’s macro trend, starting with the just released UK industrial production and trade deficit figures. Data showed that Britain’s industrial output declined unexpectedly for July, following a drop of the same magnitude in June. In addition, the manufacturing component of the output posted a surprise drop for July, as the sector was hurt by an earlier than usual summer shutdown of vehicle production lines. The weak factory numbers have come a day before the Bank of England unveils its interest rate decision. Today’s disappointing industrial output data reinforces the view that a majority of the policymakers would continue to vote to maintain rates. Separately, the nation’s trade deficit widened more than estimated for July. Sterling has drifted lower against the major currencies this morning, post the release of downbeat UK economic data prints.
Moving ahead, today’s monthly estimate of GDP from the NIESR for the three month period until August will shed further light on the broad macro trend for the UK economy.
US Dollar – US Markets
The US Dollar traded on a weaker footing against the Pound in yesterday’s trading session. The NFIB survey showed that morale among small business in the US improved less than expected for August, with expectations of benign inflation pressures in the near term. Furthermore, in a noteworthy development, the Chief Economist of the World Bank suggested that the US Federal Reserve should not opt for a rate rise this month and wait until the global economic growth gains pace, which further weighed on the greenback.
The greenback is looking for direction against the Euro this morning. In the session ahead, two US economic releases, the government’s estimate of job openings and weekly MBA mortgage applications data, will offer fresh insight into the state of the US job market and the residential construction market. Yesterday, Fed’s labour market conditions index showed moderate improvement for August, with the index rising to a six month high. The upbeat data adds to optimism that today’s figures from the Labor Department on job openings will also deliver an encouraging signal.
Euro – European Markets
After surrendering most of its early session gains this morning, the Euro-US Dollar currency pair has now retraced back above the 1.12 mark. Also, the common currency has edged higher against the Pound this morning, after the pair drifted below the 0.73 mark yesterday. With little in terms of key economic data on tap in Europe today, traders will closely be monitoring sentiment in global financial markets and also watch out for macroeconomic updates from the other major economies for further direction.
Euro zone’s revised GDP figures that were released yesterday showed that the region’s economy grew faster than initially thought for the three month period until June, buoyed by faster growth in Italy and Greece. The upward revision in the growth data was likely a result of a revival in the region’s exports during the second quarter which offset the impact of a slowdown in household consumption and a decline in investment spending. However, the upbeat GDP data failed to lift the Euro against the major currencies yesterday.
Other Currencies – Highlights
The Aussie Dollar is trading higher against the US Dollar this morning, despite a downbeat reading on consumer sentiment and weaker than expected housing finance data from Australia earlier today. Consumer confidence deteriorated in September, according to the latest Westpac-Melbourne Institute index, fuelled by a deluge of disappointing news surrounding the recent upheaval in the global markets, weak Australian economic data and concerns about slowing economic growth in China. In separate data, the value of new home loans rose at a slower than expected pace for July, as banks raised interest rates in a bid to limit lending growth.
RBA Deputy Governor, Philip Lowe at the CEDA conference in Melbourne earlier today refrained from offering any clear hints that the central bank could lower interest rates anytime soon. He downplayed concerns regarding Australia's largest trading partner China, and the softer second quarter GDP reading. Going forward, Australia’s labour market data and a report on consumer inflation expectations, scheduled tomorrow, will draw significant market interest.