Data-heavy week across the board
With no significant UK data releases last Friday, international developments dominated the market. The Pound strengthened to around 1.3150, near 10-month highs against the Dollar, but against the Euro it was unable to sustain the move beyond 1.1235 and settled close to 1.1170.
Expectations of a ‘softer’ EU exit rose, easing market fears with the prospect of a prolonged transition period. The underlying degree of uncertainty would still risk undermining business investment. Sterling held a firm tone above 1.3100 against the Dollar this morning, with caution ahead of Thursday’s Bank of England monetary policy meeting curbing selling even with consensus forecasts of rates remaining unchanged.
German inflation was stronger than expected, increasing by 0.4% in prices for July with year-on-year rising to 1.7% from 1.6%, aiding Euro strength. The data maintained expectations that the ECB would push towards a tapering of bond purchases, especially if Monday’s Euro-zone data is stronger than expected.
The Euro saw two-year highs of 1.1743 against the Dollar as Euro data released highlighted continued signs of growth at the beginning of the third quarter and encouraged investors to buy the Euro.
The European Union will release its CPI (Consumer Price Index) figures today and Q2 preliminary GDP (Gross Domestic Product) on Tuesday. No real change in data is expected but bullish bias remains firmly in place. With a non-monetary policy meeting scheduled to take place on Wednesday also, the EUR has a large scope for volatility and uncertainty across the week.
The flash reading of Q2 US GDP growth met consensus forecasts of 2.6%. Personal consumption expenditure strengthened to 2.8% from a revised 1.9%, with investment also making a positive contribution as business spending rose strongly. Although the data indicated solid growth, the Dollar was unable to gain any significant traction from the data.
There was a weaker than expected reading for the GDP price index and the employment cost indicator was also slightly below consensus forecasts, with a 0.5% second-quarter increase from 0.8% previously. The subdued inflation data triggered fresh doubts surrounding Fed tightening which undermined Dollar support.
Data To Watch:
8:00am EUR Unemployment (Jun)
8:30am GBP Consumer Credit (Jun), Mortgage Approvals (Jun)
9:00am EUR Unemployment Rate (Jun), EUR Consumer Price Index (YoY) (Jul), Consumer Price Index – Core (YoY) (Jul)
10:00am GBP Inflation Report Hearings
1:45pm USD Chicago Purchasing Managers’ Index (Jul)
2:00pm USD Pending Home Sales (YoY) (MoM) (Jun), Dallas Fed Manufacturing Business Index (Jul)