Fundamental Analysis

EUR

"With Brexit uncertainty weighing on exports and industrial weakness, it seems that the consumer has to carry a lot of the weight of the euro zone expansion on its shoulders".

- Bert Colijn, ING

Consumer prices in the Euro zone rose slightly on an annual basis in July, official data showed on Thursday. According to final estimates from Eurostat, the Consumer Price Index (CPI) in the region grew 0.2% year-over-year on a non-seasonally adjusted basis last month, up from the 0.1% hike seen in the preceding month and in line with analysts' expectations. On a monthly basis, consumer prices in the 19-nation currency bloc fell 0.6% in July, following the previous month's 0.2% gain and falling behind the 0.4% drop forecast. Meanwhile, so-called core inflation, excluding alcohol, tobacco, food and energy, jumped 0.9% on a yearly basis in the same month, unchanged from last month's reading and in line with market expectations. Energy prices fell 6.7% on an annual basis and 1.0% on a monthly basis, whereas prices for services, the largest component of the bloc's economy, increased 1.2% year-over-year. Back in June, the annual rate of inflation in the Euro zone rose 0.1% for the first time since January.

In December 2015, the Euro zone fell into deflation for the first time since October 2009, forcing the European Central Bank (ECB) to launch its massive quantitative easing programme. The main objective of the central bank's monetary policy is to reach price stability across the region. The ECB strives for an inflation rate of below, but close to, 2% over the medium term June.

USD

"Claims continue to outperform. Employers are reluctant to lay people off. It's consistent with firmer household spending".

- Mike Englund, Action Economics LLC

Initial jobless claims posted a surprise fall, fresh data revealed on Thursday. According to the Department of Labor, the number of Americans filing for unemployment benefits dropped to 262,000 in the week ended August 13, following the preceding week's reading of 266,000, whereas market analysts pencilled in a slight increase to 269,000 in the reported period. Four weeks ago, claims hit the 43-year low of 248,000 touched in mid-April. Last week's data marked the 76th consecutive week of initial jobless claims below the 300,000 level, the longest streak since 1973. Meanwhile, the four-week moving average, considered a better measure of labour market trends, jumped 2,500 to 265,250 in the week ending August 13. Other data released on Thursday showed an unexpectedly large improvement of business activity in the US mid-Atlantic region. According to the Philadelphia Federal Reserve's survey, the manufacturing activity index rose to 2.0 points in August, after dropping 2.9 in the preceding month, while economic desks anticipated an increase to 1.2 in the reported month. Furthermore, the survey's six-month outlook indicator grew to 45.8 in August from last month's 33.7, posting the highest reading since January 2015. The survey tracks business activity in eastern Pennsylvania, southern New Jersey, and Delaware. The Philly Fed index is seen as one of the first monthly indicators of the health of the US economy.

GBP

"Consumer spending habits have not fallen as sharply following the referendum as had been forecast by some. That being the case, retailers will be hoping that the current good weather holds, and that the feel-good factor being created by the Olympics translates to further spending on food and drink and Games-related merchandise".

- Paul Morales, Lloyds Bank Commercial Banking

Britain's retail sales rose more than expected last month, fresh data from the UK Office for National Statistics revealed on Thursday. The volume of sales increased 1.4% on a monthly seasonally adjusted basis in July, compared to the 0.9% fall see in the previous month, while markets anticipated an increase of 0.1% in the reported month. Year-over-year, retail sales jumped 5.9% in the same month, following June's 4.3% rise and surpassing the 4.1% market forecast. Excluding auto fuel, retail sales grew 1.5% month-over-month in July, up from the 0.9% drop registered in June, whereas economic desks pencilled in a slight increase of 0.1%. On a yearly basis, core retail sales advanced 5.4% in the seventh month of the year, after rising just 3.9% in the preceding month, while analysts expected UK core retail sales to climb 3.6% in July. All sectors posted sales growth in July; however, the majority of the sales growth came from non-food stores rather than supermarkets.

The data covered the four-week period from July 3 to 30 after the United Kingdom voted to leave the European Union; however, analysts suggest that the reaction of the economy may be delayed by a couple of months. Moreover, they assume that the sales growth was driven mainly by the weaker Pound. Following the release, the British Pound jumped 0.4% against the US Dollar and 0.2% against the Euro.

 

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