Yellen and Draghi’s Testimony to Grab Headlines
Heavyweight speakers from the US and the Euro zone feature in today’s economic calendar. The Federal Reserve (Fed) Chairwoman, Janet Yellen, will address the Senate Committee on Banking, Housing and Urban Affairs, while the European Central Bank (ECB) President, Mario Draghi, will appear before the European Parliament Committee on Economic and Monetary Affairs. Bearing in mind how much both these top-notch central bankers have spoken recently on subjects like monetary policy and Brexit, investors will pay special attention to the tone and the conviction with which they deliver their testimonies.
In the UK, the just released data showed that the nation’s budget deficit widened in May. Later, the Confederation of British Industry (CBI) will publish its industrial trends index figures for June. Meanwhile in the Euro zone, monthly ZEW economic sentiment data for June will be in focus.
Pound Sterling – UK Markets
The Pound has extended its previous session gains against the greenback this morning. The just out data showed that the UK’s budget deficit considerably widened in May. Moving ahead, investors look forward to the Confederation of British Industry’s report on industrial orders for June, due in a few hours, which is expected to post a further decline. Further ahead this week, all attention will be directed towards the controversial EU referendum vote. Apart from this, on the economic release front, the UK’s BBA mortgage approvals data for May, is scheduled later this week.
Yesterday, Sterling surged against the US Dollar and posted its biggest one-day gain in almost eight years, after two of the three EU referendum polls put the ‘Remain’ camp in the forefront. Campaigning for EU membership resumed on Sunday after a three-day hiatus prompted by the killing of a pro-EU lawmaker and has since tilted the weight towards the “Bremain” camp.
US Dollar – US Markets
The US Dollar is trading on a weaker footing against the shared currency and the Pound this morning, ahead of a two-day appearance by the US Fed Chairwoman, Janet Yellen, before the Senate Banking Committee, where she is scheduled to deliver a testimony related to the recent US Fed monetary policy decision. Last week, the US central bank policymakers voted unanimously to hold the benchmark interest rate steady amid slowing labour market conditions in the country. Additionally, the Fed Governor, Jerome Powell, is due to give opening remarks later today, at a New York roundtable on the interim report of the Alternative Reference Rates Committee.
Yesterday, the greenback ended lower against most of its major peers amid a data light economic calendar day. Against the Pound, in particular, the US Dollar declined for the third consecutive session, as the Pound recorded the biggest percentage gain in almost eight years after recent polls swung in favour of the campaign for Britain to remain in the EU.
Euro – European Markets
The shared currency is trading mixed against its major peers this morning. Looking ahead, investors await the ZEW economic sentiment indicator data from the Euro zone and Germany, due in some time, and both the figures are expected to post a slight drop in June. Further, the ECB President Mario Draghi is scheduled to deliver a speech later in the day.
Yesterday, the Euro ended lower against the US Dollar and the Pound after data showed that the Euro zone’s beleaguered construction industry recorded a third consecutive month of decline in output for April. Separately, the German Bundesbank indicated that the nation’s economic growth is likely to witness a setback during the second quarter of this year, mainly due to a fall in industrial export orders and fluctuations in the construction sector. However, the German central bank offered some solace by stating that growth will rebound strongly later this year.
Other Currencies – Highlights
The Aussie Dollar rallied against the US Dollar in the morning session, heading towards the crucial 0.75 mark, after the Reserve Bank of Australia’s (RBA) June meeting minutes crossed the wires. This suggests that investors likely interpreted the document as broadly hawkish as the central bank gave no indication of potential rate cuts in the near future, easing concerns that the RBA could lower rates in the next twelve months. According to the minutes, the RBA remained upbeat about growth and employment in Australia but underlined the risks of persistently low inflation. Further, policymakers expect inflation to remain low for some time and also noted that an appreciating domestic currency could complicate the country's adjustment to its terms of trade.
On the data front, residential prices in Australia surprisingly dropped during the first quarter of this year, its first fall since the September quarter of 2012. Moving ahead, investors will eye the Fed Chairwoman, Janet Yellen’s testimony, for trading cues in the Aussie Dollar – US Dollar currency pair.