The Mother of all EU Summits
The Pound was weaker yesterday as markets await the outcome of the European Council Summit which begins today. Sterling was further harmed after the Bank of England governor failed to indicate the chances of an interest rate hike in August when he spoke earlier in the day.
GBP continued to trade downwards, with GBPUSD approaching 1.3000 this morning on headlines that Bank of England’s (BOE) Cunliffe raised concerns about household debt.
The June CBI retail sales index strengthened sharply to 32 from 11 previously and was well above consensus forecasts with spending supported by favourable weather conditions. This was the fastest pace since September 2017 and retailers remained relatively optimistic surrounding the July outlook which should underpin growth.
There is no UK data of note today, so the market will likely be driven by EU and US data and any political developments coming out of the European Summit.
The US Dollar is stronger across the board today after President Trump said the US will use more stringent vetting processes to limit the threat of US technology being bought by Chinese investors rather than imposing China-specific restrictions.
US durable goods orders declined 0.6% for May compared with an expected decline of 0.9% while there was an underlying decline of 0.3% compared with consensus forecasts of a 0.5% gain. Capital goods orders declined slightly, although the overall impact was limited. The May goods trade balance declined to $64.8bn from $67.3bn, significantly below consensus forecast as growth in exports comfortably out-paced imports. The trade data should boost second-quarter GDP growth estimates and offer some reassurance over underlying economic trends and supported the US Dollar.
Across the pond today we have the third revision of US Q1 GDP figures along with Initial Claims.
The Euro was stable yesterday against the US Dollar.
Eurozone M3 money supply growth strengthened to 4.0% in the year to May from 3.8% previously, although the rate of private loans growth was unchanged at 2.9%. In its monthly bulletin, the European Central Bank (ECB) stated that firm domestic demand had offset the impact of Euro gains and prevented any inflation impact.
The German interior minister stated that he was optimistic over solving the coalition dispute over immigration policy, although market concerns persisted and there was also wariness surrounding the EU Summit, which starts today, given immigration tensions and friction with the Italian government.
The focus of the single currency will be on the economic bulletin due to be released by the ECB today at the EU Summit, two weeks after the ECB meeting. The EU summit today and tomorrow will discuss a number of pressing issues, including migration, economics, security and Brexit.
Data to Watch:
00:50 JPY Retail Trade s.a (MoM) (May)
00:50 JPY Retail Trade (YoY) (May)
24h EUR European Council meeting
07:00 EUR Gfk Consumer Confidence Survey (Jul)
09:00 EUR Economic Bulletin
10:00 EUR Business Climate (Jun)
13:00 EUR Harmonized Index of Consumer Prices (YoY) (Jun)
13:30 USD Initial Jobless Claims (Jun 22)
13:30 USD Continuing Jobless Claims (Jun 15)
13:30 USD Gross Domestic Product Price Index (Q1)
13:30 USD Gross Domestic Product Annualized (Q1)
13:30 USD Personal Consumption Expenditures Prices (QoQ) (Q1)
13:30 USD Core Personal Consumption Expenditures (QoQ) (Q1)
14:30 GBP MPC Member Haldane Speech
15:45 USD Fed’s Bullard speech
17:00 USD FOMC Member Bostic speech