USD strengthens on safe-haven flows

Today's Highlights

• USD strengthens on safe-haven flows

• New Zealand interest rates on hold

• Big day for UK data awaits

Current Market Overview

The Reserve Bank of New Zealand left the New Zealand base rate alone at 1.75% when they met overnight. They expressed concerns over the inflation rate falling in the months ahead and a strong NZ Dollar will help that along but the strong currency is also damaging exports at a time when China; a major influence in the region, is showing signs of slowdown. The rebalancing effect of a weaker currency would be helpful right now but, while New Zealand boasts an attractive 1.75% base rate, there will continue to be demand for the high yielding currency.

Today’s diary is dominated by UK data. Overnight we heard from the Royal Institute of Chartered Surveyors that the UK housing market is slowing. On balance, just 1% of surveyed surveyors predict house price rises. That’s down from 7% in the previous report. The day continues with, what are forecast to be reasonably positive manufacturing and industrial output figures. We’ll also see the trade deficit number, which we believe will have shrunk a little and we will get the NIESR estimate of UK economic growth for the 3 months to July. That too is forecast to be on par with or a little more upbeat than last month’s 0.3%. If all these predictions come true, Sterling could have a good day at the office. If not, the Pound is already pretty weak, so it will find buyers on any dips.

This afternoon brings US producer price data as well as the weekly jobless claims numbers which may well show a little increase on the previous figures. A nervous US Federal Reserve will watch that with interest as perhaps a portent of the August employment numbers. The US Dollar has strengthened a little as safe haven flows have found their way into the US whilst the Trump v Kim rhetoric flares. Further hints of North Korea targeting Guam have emerged but it is hard to know whether this is just more sabre rattling or WW III is on the cards. Tomorrow brings US inflation data which should show a bounce back to 1.8% annualised growth and bring USD strength with it.

And online retailer ASOS is launching a search app that will seek out an item of clothing if you snap a picture of it. So, you see someone wearing dress you like and you take a picture on your phone and the app looks for the same or a similar item in the ASOS inventory. Very clever but I can’t help wondering if you might end up on the wrong end of a restraint order if you are not careful.