Happy Independence Day!
The June UK PMI construction index beat forecasts in strengthening to 53.1 from 52.5 , output hit a seven-month high and new orders increased at the fastest pace since May 2017. Capacity constraints persisted with lengthening delivery times and input costs strengthened at the fastest pace for nine months.
Bank of England MPC member Michael Saunders stated that rates could rise faster than expected by markets; a lot of spare capacity in the UK had been used up and wage growth is gradually picking up. Sterling gained but was unable to hold above the 1.3200 mark against the Dollar while the Euro found support on approach to 1.1325.
The government aims to reveal details of post-Brexit ties in a cabinet meeting on Friday, and speculation that the latest proposals envisage a very ‘soft’ Brexit provided some Sterling support. Overnight BRC data recorded a 0.5% decline in shop prices in the year to June after a 1.1% decline previously which suggests a slight increase in pricing pressure.
US headline May factory orders increased 0.4% following a revised 0.4% decline previously and slightly above consensus expectations. The latest IBD consumer confidence index strengthened to 56.4 from 53.9, although the overall data impact was very limited. Trading volumes declined throughout the day and US markets closed early. The US is shut today due to it being Independence Day; Dollar payments will resume tomorrow.
Italian Economy Minister Giovanni Tria stated that Italy faces slower growth but added “plans also to avoid measures that can worsen the current situation in public financing”, triggering fresh support for Italian bonds and the Euro.
A subdued Eurozone retail sales release made almost no ripple in the markets and comments from the European Central Bank’s (ECB) chief economist Praet, that progress towards a sustained adjustment in inflation had been substantial, failed to muster any reaction. The Euro consolidated above 1.1650 in thin trading in early Europe on Wednesday with a limited net advance as trading volumes remaining at low levels.
Data to watch:
02:45 CNY Caixin China Services PMI (Jun)
08:15 EUR Markit Services PMI (Jun)
08:55 EUR Markit PMI Composite (Jun)
08:55 EUR Markit Services PMI (Jun)
09:00 EUR Markit PMI Composite (Jun)
09:00 EUR Markit Services PMI (Jun)
09:30 GBP Markit Services PMI (Jun)