Last week we saw currencies continue to range trade with the US Dollar in general on the front foot. The world’s most liquid cross continues to test key psychological levels of 1.10 whilst Sterling had an active trading week on the back of news and data. After the BoE minutes, Sterling climbed across the board due to a more hawkish tone. Within the minutes, there was growing concerns from the Monetary Policy Committee members that inflationary pressures are rising. However, Thursdays UK retail figures took the wind out of Sterling’s sails as sales fell unexpectedly by 0.2% in June. Looking to the US, data continued its positive trend as U.S. jobless claims hit its lowest level since 1973, suggesting the labor market maintained a sturdy pace of job growth in July. Meanwhile, the markets focus was still on Greece albeit in a less intense manner. In Europe, there was some disappointing purchasing managers numbers from both the manufacturing and services sector.
Looking to the week ahead:-
Much of the focus will be on two sets of numbers today. From Germany we have the IFO survey which is a composite index based on surveyed manufacturers, builders, wholesalers, and retailers and an indicator of economic health. Crossing the pond the US durable goods will be monitored to see if it can bounce back from last month’s decline.
The first reading of Q2 GDP is expected from the UK today, a weaker than expected number could pour more cold water on the expectations of an early rate hike. Last week’s decrease in retail sales was disappointing and posted a negative number. Consumer spending makes up a large part of growth so Sterling could be under threat here. Meanwhile, the FOMC start their two day meeting and US consumer confidence hits the wires.
Much of the focus will be after the European markets close with the conclusion of the FOMC meeting and statement. With no meeting due in August the market will be looking to decipher the statement for clues on rate policy. The market is starting to lean towards September as the long awaited “lift off” date for rates. Data has been positive so it will be interesting to see if the FOMC acknowledge this.
Focus will once again be on the US as to whether Wednesday nights statement will be supported by the release on weekly jobless claims (which posted its best figure since 1973 last week) and the first reading of Q2 GDP. This is expected to bounce back from Q1 after the cold snap experience at the beginning of the year.
A slightly tame end to the week but let’s not forget that it is also month end which can cause some erratic price action. That said there is still enough to keep markets on their toes with data from the Eurozone and US.