We End the Week on a Lighter Note
There is no significant economic data scheduled for today. With the European Central Bank (ECB) out of the way, focus now shifts back to the Federal Reserve’s (Fed) monetary policy meeting, due later this month.
The just out data showed that the UK’s goods trade deficit narrowed in July, as did Germany’s trade surplus after exports unexpectedly recorded their steepest fall in almost a year. Across the Atlantic, the US wholesale inventories data is due today along with a speech by the Boston Fed President, Eric Rosengren.
Pound Sterling – UK Markets
The Pound is trading mixed against the US Dollar and the Euro this morning. Data released earlier in the session showed that the nation’s goods trade deficit narrowed in July. Additionally, Britain’s construction output stagnated during the same month.
Yesterday, Sterling ended lower against the US Dollar, falling below the crucial 1.33 mark, given a sudden shortage of data releases from Britain, and as the greenback strengthened after US jobless claims surprisingly declined last week. The Pound also lost ground against the shared currency yesterday - the Euro gained traction following the ECB’s decision to leave interest rates unchanged and having dashed expectations of extending its stimulus programme. Separately, the Organisation for Economic Co-operation and Development (OECD) in a sudden volte-face played down the impact of Brexit on the British and world economies. Prior to the referendum vote, the OECD had warned that the Brexit vote would have a ‘large negative shock’ on the global economy.
US Dollar – US Markets
The US Dollar is trading lower against the shared currency and the Pound this morning. Today appears to be a pretty calm day with respect to US economic releases. The nation’s final reading of wholesale inventories data for July is due to release later today. Apart from this, the Boston Fed President, Eric Rosengren, is scheduled to deliver a speech, which will be closely followed by market participants to gain fresh insights on the central bank’s interest rate outlook. Next week’s data releases from the US will undergo some intense scrutiny, as the Fed’s monetary policy meeting fast approaches. The nation’s retail sales, industrial production and consumer price index data, are all due next week.
Yesterday, a report by the US labour department showed that the number of Americans filing for unemployment benefits surprisingly declined last week to a 2-month low level, indicating sustained labour market strength in the economy. Separately, the nation’s consumer credit rose more than expected in August.
Euro – European Markets
Yesterday, the ECB displayed no mood to change course for the time being as it kept all of the key interest rates and its asset purchases programme unchanged. This came as a disappointment for market participants as they were expecting the central bank to extend its bond-buying programme beyond March 2017. Following the ECB’s announcement, the shared currency surged against the US Dollar to touch its highest level since 26 August. ECB President Mario Draghi’s press conference this time was a relatively subdued affair. In fact, he stated that policymakers had not even discussed an extension of the quantitative easing programme. However, he did introduce a modest downgrade to the central bank’s growth forecasts and warned of downside risks.
This morning, the Euro seems to be extending its steady recovery mode against its major peers, as dust slowly settles over the ECB’s disappointment. On the data front, German trade surplus narrowed in July, after exports surprisingly fell, posting the steepest drop in almost a year.
Other Currencies – Highlights
The Canadian Dollar is trading lower against the greenback this morning, falling for the third consecutive session. This week ends with Canada’s unemployment rate data for August which is expected to hold steady. Additionally, the nation’s housing starts data is scheduled for release and is likely to post a decline for August.
Yesterday, data showed that Canadian building permits rebounded in July, breaking a 2-month slide, as a rise in permits for institutional and industrial buildings helped offset a drop in residential permits. Also, the nation’s new housing price index, which measures changes in the selling prices of new homes, advanced above expectations in July. Other Canadian developments this week included the Bank of Canada’s decision to freeze the benchmark interest rate at 0.50% once again, stating that underlying economic conditions do not warrant a change in policy at this time. However, the central bank raised concerns about the disappointing performance of the nation’s export sector during the second quarter.