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ECB to move in September?

ECB to move in September?

GBP 
With no tier one UK data, Bank of England MPC member Ian McCafferty’s comments, in favour of an interest rate hike at the August policy meeting, provided Sterling support. There was selling interest above 1.2950 against the Dollar, and the Pound continued to recover some ground, reaching the 1.1365 level against the Euro.

The Bank of England credit conditions survey reported that banks expected to tighten credit standards during the third quarter which is likely to temper consumer spending trends in the medium term. Global factors dominated with global trade optimism and a firm tone on commodity currencies providing net Sterling support.

The Pound edged above 1.2950 against the Dollar with markets waiting for further evidence on potential Bank of England policy.

USD

US jobless claims edged down to 247,000 in the last week, whilst both headline and core producer prices rose 0.1% for June. Fed Chair Janet Yellen added nothing new in the second round of her congressional testimony. She was, however, optimistic surrounding the US outlook and expected that inflation would gradually rise, especially as a tight labour market would put upward pressure on wages.

Dallas Fed President Robert Kaplan stated that he would like to see greater evidence of progress towards 2% inflation, reiterating that inflation trends will be crucial for the near-term outlook.

EUR

There were reports from European Central Bank (ECB) sources that the central bank would announce a tapering of its bond-purchase programme for 2018 at September’s policy meeting. The report triggered a reversal in bond markets as German yields moved higher and helped stabilise the Euro, which had been dipping lower under the weight of an on-going correction. The Euro moved back above the 1.1400 level against the Dollar.

ECB President Mario Draghi is also scheduled to speak at the Jackson Hole conference in late August, which reinforced speculation that the September ECB meeting would contain significant policy changes.

Data To Watch: 
10:00am EUR Trade Balance s.a (May), Trade Balance n.s.a (May)
12:30pm USD Retail sales ex Autos (MoM)(Jun), Retail Sales (MoM)(Jun), Retail Sales Control Group (Jun), Consumer Price Index Ex Food & Energy (MoM)(YoY)(Jun), Consumer Price Index (MoM)(YoY) (Jun) 
1:15pm USD Capacity Utilization (Jun), Industrial Production (Mom) (Jun)

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