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Central Banks united in hawkish views

Central Banks united in hawkish views

GBP
 The Pound rose to a seven-day high following comments from Bank of England Governor, Mark Carney, that he was confident an economic slowdown was temporary and that inflation was rising towards the target. However, the move was short-lived with concerns for Brexit ahead of May’s cabinet meeting on Friday.

Governor Carney stated that the data has given confidence that first-quarter economic weakness was largely related to adverse weather conditions rather than the economic climate. He also stated that slack in the economy has largely been used up and that domestic inflation pressures have continued to firm as expected. He reiterated that a tighter monetary policy will be needed over the medium term and that the Monetary Policy Committee will have enough information to make a rate decision in August despite changes to the statistics release schedule.

Carney’s views were in line with Chief Economist Andy Haldane’s and suggested that the bank would raise rates in August unless there are important shocks ahead of the decision. Sterling pushed higher following the comments with a move above 1.3250 against the Dollar.

Today we see the UK Cabinet meeting and attempt to secure a unified Brexit stance.

USD

The US ADP data disappointed with a modest 177,000 increase for June private-sector employment against forecasts of 190,000. May’s data was revised up and the overall labour market remained tight amid more severe labour shortages. Initial jobless claims increased to 231,000 from 228,000 and the data had some impact in nudging the Dollar weaker, as expectations for today’s NonFarm payrolls were reined in.

Service PMIs printed 56.5 and there was further upward pressure on prices. The June ISM non-manufacturing index increased to 59.1 from 58.6 previously and above consensus expectations of 58.3 with business activity and new orders components both above 63.0. There was a decline in employment growth and the rate of price increases also moderated slightly, although there were still important capacity constraints within the transport sector.

The data failed to provide a significant buoyancy to the Dollar and no traction following the Federal Reserve minutes The Euro edged back above 1.1700 on firm German industrial production data amid caution ahead of NonFarm payrolls.

EUR

A solid upturn seen in the German industrial output renewed the upside in the major. German Industrial Production (M/M) May arrived at 2.6% versus 0.3% expected. There was an upward revision to April’s data which, coupled with a report that some European Central Bank (ECB) members viewed the end of 2019 as too late for an interest rate hike, triggered some relief surrounding the outlook and the Euro advanced to a three-week high above 1.1700 against the Dollar.

Data to watch:

06:00 JPY Leading Economic Index (May)
07:00 EUR Industrial Production n.s.a. w.d.a. (YoY) (May)
13:30 USD Nonfarm Payrolls (Jun)
13:30 USD Average Hourly Earnings (YoY) (Jun)
13:30 USD Unemployment Rate (Jun)
13:30 USD Labor Force Participation Rate (Jun)
13:30 USD Average Hourly Earnings (MoM) (Jun)
13:30 USD Trade Balance (May)
13:30 CAD International Merchandise Trade (May)
13:30 CAD Unemployment Rate (Jun)
13:30 CAD Participation rate (Jun)
13:30 CAD Net Change in Employment (Jun)
15:00 CAD Ivey Purchasing Managers Index s.a (Jun)
15:00 CAD Ivey Purchasing Managers Index (Jun)
18:00 USD Baker Hughes US Oil Rig Count

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