US Advance Retail Sales in the Spotlight
The pace of global economic releases heats up today. First up, Britain takes centre stage with the just released consumer inflation figures. The nation’s consumer price index (CPI) rose less than expected in May, thereby exerting pressure on the Bank of England policymakers. Next in sight is the official report on the Euro zone's industrial activity for May, which is projected to reveal a significant increase.
Across the Atlantic, today’s data release includes the US retail sales report for May, the most important indicator coming out after the disappointing nonfarm payrolls report. Meanwhile, the nation’s export and import price indices data are scheduled for release along with the US business inventory report for April. Further, the Federal Reserve (Fed) commences its two-day monetary policy meeting today, with the outcome expected to be announced tomorrow along with the statement of economic projections.
Pound Sterling – UK Markets
The Pound remains fragile and is trading on a weaker footing against its major peers in the morning session over mounting concerns that Britain might leave the European Union (EU) in a referendum which is less than ten days away. Additionally, the just out data showed that annual inflation in the UK remained steady in May. Meanwhile, the core inflation rate came in lower than anticipated on an annual basis.
Yesterday, Sterling gained ground against the US Dollar for the first time in the last five consecutive sessions amid a broad weakness in the greenback. However, it continued to remain under pressure against the shared currency in response to recent poll results confirming the “Leave” option in the lead as the controversial EU referendum draws closer. A group of reputed world leaders including the British Prime Minister, David Cameron, the German Chancellor, Angela Merkel and the International Monetary Fund Managing Director, Christine Lagarde, have all issued stark warnings on the ramifications of the UK’s departure from the EU.
US Dollar – US Markets
The greenback trimmed most of its previous session losses and has turned positive against the Euro and the Pound this morning. Today, there are several economic releases lined up in the US. The data which commands the most significance today is the nation’s advance retail sales data for May, which is expected to post a slowdown. The less volatile gauge, excluding auto, is also expected to deteriorate. In addition to this, the US NFIB business optimism index, business inventories and the import and export price indices data will also be closely watched by market participants.
Meanwhile, the top US Fed authorities will converge today as a part of their two-day monetary policy meeting, which will reach its conclusion tomorrow. It is widely expected that the Fed will maintain the status-quo at this meeting, particularly after an awful May jobs report that threw cold water on expectations for a near-term rate increase. However, investors will look for clarity on when the Fed decides to make its next move on rates.
Euro – European Markets
The shared currency is trading mixed against the US Dollar and the Pound this morning. Data released earlier in the session showed that the Spanish consumer price index (CPI) fell more than expected in May. Meanwhile, the Italian CPI grew at a steady pace during the same month. Next up for release is the Euro zone’s industrial production figures for April, which will provide the first hard evidence on the state of the Euro economy in the second quarter. Expectations are for the data to post a strong bounce back, thereby recording its first increase in three months.
Yesterday, the Euro bounced off one-week lows against the US Dollar, ending a three-day losing streak, as sentiment in the greenback remained weak ahead of the highly-anticipated Fed interest rate decision wherein the central bank is widely expected to leave the key interest rate unchanged. Against the Pound, the Euro continued to maintain its upside tone after Sterling took a hit following fears of Britain leaving the EU at the upcoming referendum.
Other Currencies – Highlights
The Australian Dollar reversed its previous session gains and is trading lower against the greenback amid subdued oil prices. Earlier in the session, the Australian Dollar managed to surpass the crucial 0.74 mark, following the release of upbeat Australian business conditions index data. A private survey showed that Australia’s business conditions index remained elevated in May, supporting the case for the Reserve Bank of Australia (RBA) to hold off on any further cut in the interest rate. On the other hand, the business confidence index dropped in May. Australia’s economic releases in the week ahead include the nation’s monthly unemployment data, consumer inflation expectations, and the Westpac consumer confidence indices data, along with the RBA Bulletin report.
Elsewhere in China, Australia’s number one trading partner, retail sales, and fixed-asset investment unexpectedly cooled in May, spelling trouble for the nation’s goal of sustained, moderate growth. Nevertheless, the nation’s factory output growth remained steady in May.