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August is normally a funny time for the markets as traders are either lying on their sun loungers or looking forward to doing so. This means liquidity in the markets is a bit thinner, resulting in higher volatility.

The beginning of this month has been no different from other Augusts, although focus is now being shifted to major data releases from the UK and the US towards the end of the week. Yesterday we saw weaker than expected construction PMI from the UK which caused a little dent in GBP strength against the US Dollar. This was exacerbated by a statement from Atlanta Fed President Lockhart in which he confirmed that a rate hike in September would take place, unless “significant deterioration in data occurs”.

We now look forward to more data out of the UK and especially tomorrow’s Monetary Policy Committee rate decision, Quarterly Inflation Report, policy minutes and the subsequent Mark Carney press conference. There is going to be a lot of data to digest and the start of a new era in reporting for the Bank of England. We should expect a couple of members to vote in favour of a rate hike but the majority to want to carry on as before. We will also see the US Non-Farm Payroll data coming out on Friday. All noises are positive from the US and UK so we should continue to see strength.

In Japan, all is calm as there is no need to worry about the current weakness of the Yen as long as moves are gradual and they are not looking to ease policy.

In Australia, the Reserve Bank of Australia kept the interest rate unchanged at 2.0% and seem quite comfortable with how things are currently progressing with the decline of the Australian Dollar falling into line with declining commodity prices.

Major data releases today are Market Services PMI from Germany, the Eurozone, US and the UK, Eurozone retail sales  and the US trade balance.

Have a good day!

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