UK Inflation Data in Focus Tomorrow
The BoE meeting minutes, US FOMC meeting and the Greek debt talks will be the key events of focus this week. Domestically, consumer price inflation data, due tomorrow, is likely to reaffirm the BoE’s views that the recent dip into deflation was temporary. Also, the nation’s employment figures scheduled mid-week will be eyed to gauge the strength of the nation’s labour market.
In Europe, developments from Greece will continue to dominate headlines as risk of the nation exiting the Euro bloc ticks higher. Across the Atlantic, reports on industrial production and home-builder sentiment will shed light on the outlook of the economy.
Pound Sterling – UK Markets
The Rightmove data released earlier in the day indicated that asking prices for homes in the UK this month surged to the highest level since February 2014, due to supply constraints in the UK residential market and as concerns about new property tax eased after the general election result. However, Sterling’s reaction to the data was limited, with the Pound trading on a weaker footing against the US dollar this morning.
Going forward, some notable UK economic releases including consumer price inflation and employment figures scheduled this week are likely to lead to volatility in the Pound against its key peers. The CPI reading tomorrow is anticipated to show that inflation pressures returned in the UK last month, allaying fears that the economy could sink into a prolonged period of falling consumer prices. Also, given the importance that the BoE has laid on the strength of the UK labour market for its monetary policy decisions, the nation’s latest employment figures due mid-week will also attract significant market attention. Strong employment growth or rising wages could provide support to Sterling.
US Dollar – US Markets
The US Dollar is trading on a stronger footing against the Euro this morning, ahead of data on industrial production that is scheduled to take center-stage later in the trading session. Markets anticipate that the May industrial production will recover following two consecutive months of contraction, providing a considerably brighter outlook of the economy. Moreover, housing data this week will give a fresh viewpoint on the current state of the nation’s housing market, starting with the NAHB housing market index that is set for release later today. After last week’s data showed a surge in demand for mortgage applications in the first week of June, the home builder sentiment index today is likely to show that the US housing market is poised to display stronger growth for the remainder of the year.
The US Dollar traded lower against its key peers on Friday, despite a gauge of prices received by US businesses in May climbing to the highest level in more than a year. Also an upbeat consumer sentiment survey concluded a week of strong US economic data.
Euro – European Markets
The Euro has nudged lower against the US Dollar this morning, retreating further from last week’s highs as the cash strapped nation inched a step closer to defaulting on its debt payment and raised the prospects of leaving the Euro zone after its latest attempt to reach a deal with creditors collapsed during the weekend. The focus will now shift towards the Euro area finance ministers meeting later this week that would determine the fate of the nation. In the European economic calendar, Euro zone’s trade figures for April will show whether exports continued to support the region’s economic recovery.
The Euro traded higher against its major peers on Friday, hovering close to the 1.13 mark against the US Dollar on hopes of a Greek debt deal after the cash strapped nation was reported to have submitted a new proposal to its international creditors before heading into the weekend. Meanwhile, in economic news, industrial production in the Euro zone missed market forecast for April, indicating that the shared currency area’s economic recovery remains modest.
Other Currencies – Highlights
Economic data released earlier in the day showed that on an annual basis, Switzerland’s producer and import prices for May declined more than market expectations, further into the negative territory, highlighting the consequences of a stronger domestic currency on the economy. In positive news, retail sales in Switzerland rebounded in April, following three straight months of decline. After the mixed set of releases, the Swiss Franc continues to trade on a weaker footing against the greenback.
Last week, Switzerland’s KOF institute raised its economic forecast for the Swiss economy to 0.4% for this year and to 1.3% for 2016 from its earlier growth forecasts of 0.2% and 1.0%, respectively. The Swiss Franc edged higher against the US Dollar on Friday, following the upgraded growth forecast.