Mixed data from Australasia
Eurozone inflation and GDP coming thick and fast
UK inflation could surprise to the upside
FX Market Overview
The post Olympics blues seems to have hit the markets on a Monday when there was almost a complete lack of market data so very little happened yesterday. Sterling traded narrow ranges and dealing desks were full of traders awaiting this morning’s flurry of data releases.
Overnight we heard that New Zealand retail sales picked up in Quarter 2 but the New Zealand Dollar remains on the back foot. We also heard that Australian business confidence was mixed. In a pair of indices published by the National Australia Bank, Business conditions fell to -3 whilst business confidence rose to +4. So, as far as Australian businesses are concerned, things aren’t great right now but they are likely to improve.
We have also had data this morning showing the French economy flat-lining and the German economy slowing to just 0.3% growth in the 2nd quarter. The Euro is also flat-lining after that data. We knew Germany was not immune to the problems in the Eurozone and, as the funder of many of the revival initiatives, Germany is doing a lot of the ‘heavy lifting’ as it is put that is having a decidedly negative effect on German taxpayers and it is causing Chancellor Merkel some serious political headaches. Thankfully for Mrs Merkel, this is the holiday season across Europe so the newswires are a bit sleepy but she returns from her Italian break to a lot of drama over the next few weeks. We get the Eurozone GDP growth data this morning and it should reflect a small amount of economic contraction for the overall economy of the 17 member states. The euro appears unmoved by the prospects but we may see a different reaction after the data hits the screens.
This morning brings the UK inflation data which could show a slowdown in the pace of price rises. That may give the Bank of England a bit of wriggle room to be able to push a little more money into the economy and the focus of the market will turn to the base rate which many believe will be cut in November but could they drop it to 0.25% sooner than that? No one knows yet. Personally, I don’t think inflation is likely to have fallen significantly and, if I am right, we may see Sterling improve as the day continues. Tomorrow’s release of the minutes from the last Bank of England meeting may provide some clues on the future path of interest rates.
This afternoon brings US retail sales and we are expecting a pick up from last month’s minus 0.5%. The US Dollar is balanced between those selling it to buy more attractive assets with higher yield and those keeping the money in the safe haven confines of the US Treasury certificate.
And I have had further thoughts about my favourite Olympics moment; Jess Ennis making that awesome start with a world’s best in the 110 hurdles is right up there with Boris Johnson dancing to the Spice Girls.