In the absence of UK economic data releases or political developments yesterday, markets continued to brood over weak economic conditions and political uncertainty. Persistent fears that Brexit uncertainty would undermine the economy mean that both concerns are considered in tandem. The Pound was firm on opening but gradually drifted to lows near 1.2500 against the Dollar and the Euro tested the key 1.1111 level.
UK labour-market data is due this morning with the Sterling focus on both unemployment and average earnings. Sentiment will be vulnerable to any evidence of weakening employment figures and slower wages growth as it would dampen any remaining expectation of any Bank of England interest rate hike. Reports overnight suggested potential EU concessions to avoid a ‘no-deal’ Brexit, but that the UK stance risked a hardening of the EU resolve. Sterling opened little changed this morning but the Euro appears determined to break through the 1.1111 mark and positioning ahead of UK data could see the Dollar break lower too.
This week's economic calendar slows down a bit from the Central Bank heavy outlay the week prior. Following last month’s slide, the July US New York Empire manufacturing survey recovered to 4.3 from -8.6 in June which was also above consensus forecasts. The new orders component also improved but remained in negative territory while unfilled orders continued to decline. Other metrics were also mixed with a slight easing of upward pressure on prices while employment declined at the fastest rate for close to 3 years
There were no significant comments on monetary policy from Federal Reserve speakers yesterday with expectations of a July rate cut continuing to curb underlying dollar support. The Dollar holds steady this morning with the Euro held just above 1.1250 and the Pound hovering around 1.2450 ahead of the latest US retail sales data release later today.
The Euro was unable to make any headway on Monday with German yields moving lower on the day. Expectations of a dovish ECB policy and a potential rate cut during the third quarter hampered the single currency and Brexit uncertainty was also a factor in curbing support given fears over a disruptive ‘no-deal’ outcome in October.
Markets will monitor EU political developments today with the EU parliament due to vote on key appointments including Ursula von der Leyen as EU Commission President. Rejection of the nominees would increase political friction. Overall yield spreads moved against the Euro which depleted support and slowly drifted lower towards 1.1250 against the Dollar in lacklustre conditions.
Data to watch:
01:30 AUD RBA Meeting Minutes
08:30 GBP Claimant Count Change (Jun)
08:30 GBP Average Earnings Including Bonus (3Mo/Yr) (May)
08:30 GBP Average Earnings Excluding Bonus (3Mo/Yr) (May)
09:00 EUR ZEW Survey - Economic Sentiment (Jul)
09:00 EUR ZEW Survey - Current Situation (Jul)
12:00 GBP BoE's Governor Carney speech
12:15 USD Fed's Bostic speech
12:15 USD Fed's Bowman speech
12:30 USD Retail Sales Control Group (Jun)
12:30 USD Retail Sales ex Autos (MoM) (Jun)
12:30 USD Retail Sales (MoM) (Jun)
13:15 USD Industrial Production (MoM) (Jun)
n/a NZD GDT Price Index
17:00 USD Fed's Chair Powell speech
Posted in Daily Market News on Jul 16 2019