UK Public Sector Net Borrowing Falls
Data just released showed that public sector net borrowing in Britain fell for June, as income tax receipts rose to the highest level ever recorded. Moving ahead, the BoE minutes scheduled tomorrow are expected to provide further clarity on the timing of an interest rate rise following the recent hawkish commentary by the BoE Governor.
The economic calendar is relatively light in the US and Europe. Meanwhile, the Greek debt crisis appears to have abated for now after the Greek government yesterday repaid a part of its debts to international creditors. For the week ahead, market focus will be on the Markit manufacturing and service PMI figures in the US and Euro zone.
Pound Sterling – UK Markets
The just released publication showed that public sector net borrowing fell in June as the recent upbeat trend in employment and wage growth translated into improved income tax receipts. Today’s public finance figures are in line with the UK Chancellor’s plans to post a budget surplus by 2020. The Chancellor’s summer budget announced earlier this month unveiled measures to tighten fiscal policy, while the Office for Budget Responsibility revised down its forecast for borrowing this year. Meanwhile, the release of the borrowing figures for June had a limited impact on the Pound, as it continued to trade in a narrow range against the US Dollar this morning. Tomorrow, spotlight will be on the minutes of the latest BoE monetary policy meeting to gauge the views of policymakers in light of the BoE Governor Mark Carney’s recent hawkish commentary. Also, the confederation of distributive trade survey data and retail sales later this week will be noted for cues about the current health of the economy.
Sterling dropped below the 1.56 mark against the US Dollar yesterday, amid an absence of notable macroeconomic releases in the UK.
US Dollar – US Markets
The US Dollar strengthened against a basket of major currencies yesterday, amid an absence of significant macroeconomic indicators in the US. Demand for the greenback remained supported, as recent upbeat economic releases have reignited hopes of an interest rate rise in the near term. Last week, CPI figures showed that inflation accelerated modestly in June, bolstering the case of an increase in the benchmark interest rate by the US Federal Reserve in the coming months. Moreover, upbeat housing market releases provided more fodder for hawks in the Fed to normalise policy this year.
Surrendering most of its previous session gains, the US Dollar is looking for direction against the Pound this morning. In another slow day for economic updates in the US, investors will keep an eye on the Johnson Redbook index for early clues about retail spending and consumer behaviour in the US at the start of the third quarter. Going forward, the preliminary services PMI print, scheduled tomorrow, is expected to provide further evidence of a stable economy during the start of the third quarter.
Euro – European Markets
The Euro finished broadly lower against its major currency counterparts yesterday, after it failed to hold on to early session gains. Following weeks of turmoil in the debt ridden nation, Greece yesterday paid its overdue debt to the International Monetary Fund and the European Central Bank, reopened its banks and set out plans to commence negotiations on a new bailout package. Though Athens has taken a breather from the crisis, doubts regarding the design and implementation of the third bailout still persist, with the IMF recently referring to Greece’s debt as unsustainable. Meanwhile, the Greek Prime Minister Alexis Tsipras faces a second parliamentary vote tomorrow.
The shared currency is trading on a firmer footing against the US Dollar this morning, with no major economic data to trigger volatility in the currency pair. Later this week, market participants will focus on the preliminary Markit manufacturing and services PMI for July from various European nations and the Euro region.
Other Currencies – Highlights
The minutes of the last monetary policy meeting in Australia released earlier today painted a mixed picture with regard to interest rate movement in the future. The RBA in its meeting minutes indicated that the Australian Dollar exchange rate and overall economic growth in the second quarter will be the key parameters while evaluating the future course of action. Some key aspects such as employment, commodity prices, housing market and business investment were discussed in the last monetary policy meeting. The RBA indicated that while the nation’s labour market had improved recently, non-mining business investment remained subdued with no signs of picking up in the coming months. The minutes suggested that the economy is not strong enough for the RBA to increase the benchmark interest rate. The central bank also did not hint at lowering the rate. The Australian Dollar nudged lower against the US Dollar post the release of the meeting minutes.
Going forward, Australia’s second quarter CPI data and a speech by the RBA Governor, Glenn Stevens due tomorrow, will draw maximum attention and is likely to influence trading in the Australian Dollar.