Previous Day's Market Highlights
England's weekend cricketing success did not follow through into the FX markets on Monday, with sterling remaining rooted firmly to the bottom of the G10 FX leaderboard. The pound experienced downward pressure as markets remained nervous over the slowing economic momentum in the UK ahead of a key week of data releases - including inflation, retail sales and labour market figures. The releases will be closely examined for any impact of ongoing Brexit-linked uncertainties as both business and consumer confidence remain weak. Also pressuring the pound was the ongoing Conservative Party leadership contest, which finally concludes early next week - though political uncertainties show no sign of dissipating. Over the course of the day, the pound shed 0.45% against the dollar, erasing all of Friday's gains and recording a first daily loss in just under a week. Sterling also slid against the euro, shedding around 0.25%, chalking up a first daily loss in 3.
Meanwhile, Monday's only notable data release came from the US, where the New York Fed's manufacturing gauge firmed to better then expected levels in July. Data showed the index bouncing back from June's biggest one-month drop on record to record a level of 4.3, indicative of modestly improving conditions in the industry. The positive data supported the dollar in subdued trading, with the greenback gaining 0.15% against a basket of peers. The dollar's advance resulted in a weaker euro, the common currency losing 0.1%. The day's major movers were the Aussie and kiwi dollars, both gaining more than 0.3%, benefitting from better than expected Chinese industrial production data and continued healthy risk appetite.
Both antipodeans have held onto their gains overnight, with the kiwi dollar outperforming, adding 0.25% in Asian trade, after as-expected CPI inflation figures. Data showed CPI increasing at 1.7% YoY in the second quarter, 0.2% higher than in Q1 and a positive for the RBNZ after recently cutting rates by 25bps. However, inflation remains below target, which, along with a slack labour market, means further policy easing remains likely in August. Looser policy is also likely in Australia, though not until Q4, after the RBA reiterated in minutes from the July policy meeting that policy would be adjusted 'if needed' to support growth.
Away from FX, equity markets on both sides of the Atlantic recorded gains as second quarter earnings season kicked off on Wall Street. In Europe, the pan-continental Stoxx 600 added 0.4%, while the US benchmark S&P 500 added 0.02%, closing at a fresh record high. Finally, oil prices lost ground as supply disruptions from storms in the Gulf of Mexico were more short-lived than expected. Global benchmark Brent shed 0.35%, while US WTI crude lost over 1%.
|Currency Pairing||08:00 Today||Vs 08:00 Yesterday||Four-Week High||Four-Week Low||% Change|
Today's Market Highlights
The day ahead sees a number of major data releases from the UK, eurozone and US, ensuring investors will have plenty to chew over throughout the day.
From the UK, focus will fall on this morning's labour market report, with the labour market expected to remain tight, cementing its place as the UK economy's bright spot. The unemployment rate is expected to remain steady at 3.8% in May, with average earnings (including bonuses) also remaining unchanged, increasing at 3.1% on a 3-months-on-year basis. The steady pace of wage increases should be of little concerns, with upward wage pressures to be expected should the labour market remain tight. However, while a better than expected release may provide a short-term boost to the pound, Bank of England policy is set to remain on hold, despite increasing inflationary pressures, as Brexit uncertainties continue to tie policymakers' hands. Markets will hear from BoE Governor Carney this afternoon, where any monetary policy comments will be of particular interest.
Meanwhile, from the eurozone, focus will fall on this morning's economic sentiment surveys from the ZEW institute, a well respected leading indicator of economic health. Data for both Germany and the eurozone as a whole is expected to remain firmly in pessimistic territory, expected at -20.0 and -20.9 respectively - the latter would be the lowest level for the common currency bloc since January. A weak sentiment survey would likely weigh on the euro, in addition to further strengthening the case for additional ECB stimulus, likely in the shape of a 10bps deposit rate cut in September.
Finally, the US economic calendar is also busy. In terms of economic releases, June's retail sales figures are the main highlight, with sales set to have increased by 0.2% MoM, a slight dip compared to May's 0.5% increase. The less volatile, and more closely watched, excluding autos and control group measures are set to have increased by 0.2% MoM and 0.3% MoM respectively. Though more sluggish than in May, such a pace of increases would represent the 4th consecutive month of increasing sales, showing the US consumer remaining in good health despite escalating economic uncertainties. Other US releases due today include industrial production, capacity utilisation and homebuilding figures - though these are typically of little interest to markets. Markets will however focus on a number of Fed speakers throughout this afternoon, as investors continue to gauge the extent of policy loosening that is likely to take place. Top of the bill is Chair Powell's speech this evening, though remarks from Bostic, Bowman, Evans and Kaplan will be closely watched throughout the day.
Today's Economic Calendar
|9:30am||GBP||Unemployment Rate (May)||3.8%||3.8%|
|9:30am||GBP||Average Earnings - Inc. Bonus (3MoY - May)||3.1%||3.1%|
|10:00am||EUR||German ZEW Economic Sentiment Survey (Jul)||-20.0||-21.1|
|10:00am||EUR||Eurozone ZEW Economic Sentiment Survey (Jul)||-20.9||-20.2|
|1:30pm||USD||Retail Sales (MoM - Jun)||0.2%||0.5%|
|1:30pm||USD||Retail Sales ex Autos (MoM - Jun)||0.2%||0.5%|
|2:15pm||USD||Industrial Production (MoM - Jun)||0.2%||0.4%|