UK Retail Sales Unexpectedly Fall in June
Data that was just released showed that retail sales in Britain fell unexpectedly, dampening optimism about the nation’s economic growth outlook. The weak consumer spending in the UK is likely to dim prospects of higher interest rates in the near term.
Across the Atlantic, new filings for unemployment claims and Chicago Fed activity index will be in focus to project the timing of the US Fed’s first interest rate rise. Meanwhile, the Greek Parliament has voted in favour of a second round of crucial reforms as demanded by its creditors in order to begin negotiations for a third bailout package.
Pound Sterling – UK Markets
The just released data showed retail sales in the UK unexpectedly declined in June, led by a fall in sales of a wide variety of household goods including food, furniture, sporting equipment and jewelry. Though the annual retail sales growth was still strong, low monthly sales figures and weak consumer spending has fuelled concerns about Britain’s economic recovery in the second quarter. Surrendering most of its earlier session gains, the Pound is trading in a narrow range against the US Dollar, post the economic release. Moving ahead, the Confederation of British Industry’s distributive trade survey report scheduled shortly would give an early picture of retail spending for July.
The Pound recovered some of its losses against the US Dollar yesterday, after the minutes of the Bank of England’s last monetary policy meeting reflected an incremental shift in policymakers’ views towards tighter policy settings in the coming months. Meanwhile, the minutes revealed that the monetary policy committee was divided on whether the pick-up in wages posed a threat to the central bank's inflation target of 2%.
US Dollar – US Markets
The US Dollar is trading on a weaker footing against the Euro this morning, as investors look forward to economic data for clarity on when the US Federal Reserve would implement a change in its policy stance. A weekly update of unemployment claims in the US later today would provide additional ammunition for the US Fed to raise rates, while the Chicago Fed National activity data will provide a fresh perspective on the broad macro trend. Today’s unemployment claims numbers are expected to confirm robust growth ahead for the US job market. Meanwhile, the Chicago Fed activity index in the recent months has indicated that the economy has been growing moderately though below the historical trend. However, markets anticipate a modest improvement in activity for June.
The greenback recovered from most of its losses against the Pound after existing home sales rose to the highest pace in over eight years and following an uptick in mortgage applications, boosting optimism about the health of the US housing market and supporting views of an interest rate rise this year.
Euro – European Markets
The Greek Parliament approved reforms related to the judicial and banking systems imposed by its creditors earlier today, leading the way for the commencement of negotiations on a third bailout package. The agreement of these crucial measures is likely to have further eased speculation that the debt ridden nation will be coerced to abandon the Euro bloc. The Greece's radical left-led government hopes that fresh talks on the new rescue deal could be concluded by the end of next month, when Athens has to fulfill some of its debt obligations to the European Central Bank. The Euro modestly rose against the US Dollar, following the encouraging Greek news. Yesterday, the ECB increased its emergency assistance to Greek banks by €900 million, a second such cash injection in just under a week.
It is a light calendar day in the Europe. The only notable economic release is the Euro zone’s consumer confidence for July. Investors will eye the preliminary sentiment data to gauge the extent of dip in confidence considering that fears surrounding the Greek debt crisis have subsided.
Other Currencies – Highlights
The NAB's business survey, released earlier today indicated that confidence across all industries outside of the mining sector improved for the second quarter. The NAB’s index of business confidence climbed to its highest level since the third quarter of last year. The survey revealed that business confidence surged higher despite ongoing global uncertainty and sluggish domestic demand. This is broadly similar with the RBA’s July meeting minutes which showed that non-mining business profits increased over the previous year, with business conditions generally rising. Industries sensitive to lower interest rates and weaker exchange rate fared better, while mining firms continued to be impacted by low commodity prices and falling investment.
The Australian Dollar is currently trading higher against the US Dollar, ahead of a couple of US economic releases that is likely to strengthen the case of an interest rate rise by the US Fed. Yesterday, the positive inflation print for the second quarter saw the Australian Dollar gain ground, though comments from the RBA governor indicating scope for interest rate cut caused the Aussie Dollar to end lower.