Draghi can’t yet quantify Brexit
The latest UK retail sales data printed weaker than expected with a decline of 0.9% for June. This data includes the 5 weeks up to 2nd July, meaning the post-Brexit period was not measured. There was some good news yesterday – a decline in the latest government borrowing data. This meant the negative sales data had a rather muted effect on the market, with Sterling finding support against the Dollar around the 1.3200 mark.
Today there will be flash Manufacturing and Services PMI data. This is a one off release in order to help provide clarity of the potential impacts of the UK’s EU referendum on the economy. Stronger than expected readings would lessen pressure for aggressive Bank of England policy changes in August and provide some positivity for Sterling.
The Euro witnessed a volatile trading day as the currency moved to the comments made by ECB president Mario Draghi. The Euro strengthened by 0.3% as Mr Draghi held interest rates and maintained a cautious stance on the eurozone economic outlook. Mr Draghi also mentioned that he will only act with raising inflation and further quantitative easing if it was necessary to do so.
The Euro-area bond buying programme will also remain unchanged as Mario Draghi has said that he will ‘hold out’ until he knows more about the problems regarding the Italian banks. As a result, the Euro ended the day versus Sterling at around the 1.1996 levels.
US jobless data was stronger than expected for the third successive week with a decline to 253,000, a three-month low. This will offer the US further reassurance over the labour market and should maintain confidence in the US outlook with some expectations over a more hawkish Fed statement next week. There is no key data due from the States today, so Dollar prices will be driven by market sentiment.
Data to Watch: 9am EUR Flash Manufacturing PMI, EUR Flash Services PMI. 9:30am UK Flash Manufacturing PMI, UK Flash Services PMI. 2:45pm US Flash Manufacturing PMI.