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Still waiting on Central Bank clues

Still waiting on Central Bank clues

GBP 
Sterling steadied close to a one-week low yesterday, as a survey of Britain’s services businesses added to a string of weak data that could deter the Bank of England from making the first rate hike in 10 years. A number of central bank policymakers, including Governor Mark Carney, have spoken in favour of soon reversing last year’s interest rate cut.

Data released yesterday showed that growth across British services companies fell to a four-month low in June, with companies at their least optimistic in nearly a year. The headline figures will do little to shock the Bank of England just yet, this will be a warning shot for the possibility of further trouble ahead.

USD

US factory orders fell modestly short of expectations, but there was little impact ahead of employment releases today and tomorrow.

The Fed minutes revealed a general consensus that recent weakness in inflation has little bearing on underlying inflation trends, although some members were concerned that soft inflation might persist due to limited pass-through from resource utilisation. Overall, it suggests the majority are in favour of maintaining policy normalisation, but a further run of low inflation releases may change that.

The most likely outcome looks to be for the start of balance-sheet adjustment in September. The overall market impact was limited, with the Dollar eventually settling slightly lower, yet there was no significant change in Fed Funds futures.

EUR

The Eurozone PMI services-sector reading jumped to 55.4 from the flash reading of 54.7. The underlying data revealed a notable increase in confidence in France which reinforced confidence in the overall growth outlook.

European Central Bank (ECB) member Benoit Coeure confirmed that the central bank had not discussed changing monetary policy…yet. The Euro slipped slightly lower on the dovish revelation, although expectation remained for the central bank to move towards removing some policy accommodation. The Euro continued to drift lower in an on-going correction from last week’s 14-month peak and dipped to lows around 1.1315 against the Dollar.

Data To Watch:
10:00am EUR ECB Praet Speech 
11:30am ECB Monetary Policy Meeting Accounts 
12:15pm USD ADP EMployment Change (Jun) 
12:30pm Trade Balance (May), Continuing Jobless Claims (Jun), Initial Jobless Claims (Jun) 
1:45pm USD Markit Services PMI (Jun), Markit PMI Composite 
2:00pm USD ISM Non-Manufacturing PMI (Jun), FOMC Member Powell Speech 
11:00pm Fed’s Stanley Fischer Speech

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