Dollar Fed up of disappointment
Sterling recovered some ground against the Dollar yesterday, rising by 0.6 percent on the day to trade at just over the 1.3100 level. CBI UK Industrial Orders data printed in line with expectations and unchanged from the last month. Output expectations have strengthened for the next six months, although there was a slight temperance in export orders. Kristin Forbes, one of the Bank of England policymakers, stated that she saw no case for a tightening of interest rates to boost the economy in light of Britain’s vote to leave the European Union. Forbes is a known “hawk” on the BoE’s monetary policy committee and her comments will put her at odds with the majority of her fellow rate-setters. This shows a lack of consensus within the BoE Monetary policy committee after they signalled that rates would probably be cut again this year.
US jobless claims fell further than expected with at 252,000 from last week’s 260,000. After the Fed stated they were waiting for more “evidence” before hiking rates, the US jobs market continue to press the case. Existing home sales declined to an annual rate of 5.33mn in the latest week from 5.38mn previously. The Dollar has been undermined by interest rates being held and the downgrading of longer-term expectations and consequently traders have been unwinding long positions in the expectation that the US will wait until after the Presidential Elections, in November, before hiking rates.
The political situation in the Euro-zone is causing some concern with German Chancellor Merkel’s authority continuing to weaken. There was further speculation that European politicians would look to pursue a much more aggressive economic strategy. The latest Euro-zone PMI data will be watched closely on Friday amid evidence of further vulnerability and a significant improvement will be needed to bolster confidence in the outlook as the Euro drifted to just below 1.1200 against the Dollar.
Data to watch: 8.30am German (Flash) Markit PMI Services, Manufacturing & Composite. 9am Euro (Flash) Markit PMI Services, Manufacturing & Composite. 2.45pm (Flash) Markit PMI Manufacturing. 6pm US Baker Hughes Oil Rig Count