For the first time since 2010, The Halifax reported a decline in house prices of 0.1% for June with prices declining for four consecutive points, although there was still an annual increase of 2.5%. The EU Commission forecast that the UK economy would contract 9.75% for 2020 compared with the EU estimate of a contraction of 8.7%, reinforcing reservations over the relative outlook.
Sterling remained pretty stagnant in early Europe yesterday with global risk taking on a less confident tone. The UK currency regained ground ahead of the US open amid hopes for progress in EU/UK trade talks. Reports indicated the EU were prepared to offer concessions on the fishing issue which could make it easier to secure a compromise. Prime Minister Johnson reiterated that he was looking for an early trade agreement, but again insisted that the UK would leave without agreement if necessary.
Sterling sentiment now seems to have significantly improved with gains above 1.2560 against the Dollar and 1.1305 against the Euro. Chancellor Sunak is also expected to announce his support package today which will include a £2.0bn support package for youth employment.
US JOLTS job-openings data recorded an increase to 5.40 million at the end of May from a revised 5.00 million previously as separations declined sharply. The July IBD consumer confidence index declined to 44.0 from 47.0 previously, reinforcing concerns that the economic recovery would lose momentum due to fresh coronavirus concerns.
Federal Reserve (Fed) vice-chair Clarida stated that more accommodation can be put in place in the economy and there is no limit on the amount of bond buying that can be put in place. Atlanta Fed President Bostic reiterated that business owners are nervous again and that the next 3-6 weeks could be critical. There were also expectations from Fed officials that further fiscal support measures would be needed.
The Dollar against the Euro edged back to the 1.1300 area, but uncertainty dominated markets and the Euro edged lower again to trade around 1.1275 this morning as a more cautious risk tone triggered an element of defensive dollar demand.
In its latest economic update, the European Commission revised its 2020 Euro-zone GDP forecast to a decline of 8.7% from the previous estimate of a 7.7% contraction with the second-quarter contraction estimated at 13.5%. According to the Commission, Germany is forecast to decline 6.3% with contractions of over 10% for France, Spain and Italy. Overall economic risks are tilted to the downside and the Commission also warned that recovery will be uneven across member states. For 2021, the Commission is forecasting growth of 6.1%. Longer-term inflation expectations have increased to near 4-month highs which will be a significant relief for the ECB. The generally downbeat assessment undermined Euro support, with the single currency currently trading at the 1.1285 against the Dollar.
Data to watch
14:30 - USD - Crude Oil Inventories
Posted in Daily Market News on Jul 8 2020