BoE Inflation Report due at 10:30am

United States Dollar:

It was a relatively quiet day in the FX markets yesterday, with cable trading between 1.6760 and 1.6805 throughout the London session. It appears to be the calm before the storm as markets look to this morning’s key releases from the UK. First up, at 9:30am, we have the monthly Unemployment Rate from the UK, which is expected to show a drop from 6.5% to 6.4%. At the same time we have the Average Earnings Index, which is expected to show a fall in wage growth in the three months to the end of June. With the MPC concerned over the recent slowdown in earnings, this may have a bigger impact than the actual unemployment figure. At 10:30am, we have the much-anticipated quarterly BoE Inflation Report, which will contain growth and inflation projections for the next two years, and may give hints as to when UK interest rates are finally set to rise from their record low. Pound-bulls will be hoping the report hints towards a 2014 rise, although the recent poor manufacturing data and dovish tone from the last MPC minutes may mean Q1 2015 is still the favoured option. BoE Governor Mark Carney is due to give a press conference when the report is published, so after a period of relative calm in the FX markets this morning could bring some volatility. This afternoon we have Retail Sales figures from America which are expected to show steady growth. GBP/USD is up this morning and currently trades at 1.6824.

Euro:

Yesterday morning saw the release of the monthly German ZEW Economic Sentiment survey, with the reading again undershooting forecast. It printed 8.6, far less than the 18.2 expected, and big a drop from last month’s 27.1. The influential survey has fallen for seven consecutive months, and is now at its lowest since Dec 2012. Germany’s reliance on Russian gas imports means the political tensions between Russia and the EU over the Ukraine are weighing heavily on confidence. Tomorrow sees the prelim Q2 GDP release from Germany, with a contraction of -0.1% forecast after two quarters of solid expansion. France is also set to release its first estimate of Q2 GDP tomorrow, with anaemic growth of 0.1% expected, following on from the flat reading in Q1. After the French and German figures we have eurozone Q2 GDP and the final CPI release from July. EUR/USD remains under pressure and is close to its lowest level since November. It currently trades at 1.3352. GBP/EUR sits at 1.2598.

Aussie and Kiwi Dollars:

Overnight saw the release of the monthly Westpac Consumer Sentiment survey from Australia, which showed a healthy upward move from 1.9% to 3.8%. Later we had the quarterly Wage Price Index, which showed growth of 0.6% in Q2 compared to Q1. This undershot estimates of an increase of 0.8% and a fall from the previous reading of 0.7%. Following on from this, we had a raft of Chinese date with New Loans, Industrial Production and Fixed Asset Investment all missing forecast. AUD/USD trades at .9288 and GBP/AUD is at 1.8113. Tonight sees Retails Sales q/q from New Zealand with growth of 1% expected. NZD/USD trades at .8433 and GBP/NZD is at 1.9950.

Date Releases for the next 24 hours:

AUD: No data

EUR: French Prelim GDP q/q; German Prelim GDP q/q

GBP: Average Earnings Index 3m/y; Unemployment Rate; BoE Governor Carney Speaks; BoE Quarterly Inflation Report

NZD: Retail Sales q/q

USD: Core Retail Sales; Retail Sales