31st July 2017 Market Update
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?? GBP – Last week was relatively quiet for the pound, with the most significant piece of data being quarterly GDP figures on Wednesday which came in in line with market expectations. The pound held firm against the euro last week, and maintained its relative strength against the dollar, however this was due to dollar weakness as opposed to Sterling strength.
This week could be a defining week for the pound with manufacturing, construction, and services PMIs being released Tuesday, Wednesday and Thursday respectively. On Thursday the Bank of England will decide whether to increase interest rates. Depending on the forward guidance given by Carney, this could be defining for the upcoming months.
?? EUR – The euro maintained its momentum against the dollar in particular, as confidence in the single currency appears to be growing. Despite weaker manufacturing data at the start of the week, strong employment figures from Spain and better than expected CPI data from France and Germany strengthened the euro.
This week more manufacturing data will be released Tuesday, followed by the preliminary quarterly GDP figure which is expected to still be high at 0.6%. Services data is also being released from Europe on Thursday and is expected to remain in line with last month’s reading.
?? USD – Last week saw the dollar index hit a 14 month low, which shows how sentiment surrounding the dollar has changed. The main reason for this was due to last week’s interest rate decision, where the language of the Fed appeared to lower the chances of a third interest rate rise this year, something only a few months ago the market anticipated to be very likely. Despite Friday’s GDP figures coming in above expectations, the dollar remains relatively weak.
This week is also a busy one for the US. On Tuesday ISM manufacturing PMI is being released, and Wednesday ADP non-farm employment figures are released. This will act as a precursor to Friday’s non-farm employment figures, and average earnings data.
01/08/2017 5.30am – RBA Rate Statement
04/08/2017 2.30pm – RBA Monetary Policy Statement, Retail Sales
01/08/2017 9.30am – Manufacturing PMI
02/08/2017 9.30am – Construction PMI
03/08/2017 9.30am – Services PMI, 12.00pm – BOE Inflation Report, MPC Official Bank Rate Votes, Monetary Policy Summary, Official Bank Rate, 12.30pm – BOE Gov Carney Speaks
01/08/2017 3.00pm – ISM Manufacturing PMI
02/08/2017 1.15pm – ADP Non-Farm Employment Change, 3.30pm – Crude Oil Inventories
03/08/2017 1.30pm – Unemployment Claims, 3.00pm – ISM Non-manufacturing PMI
04/08/2017 1.30pm – Average Hourly Earnings, Non-Farm Employment Change, Unemployment Rate
04/08/2017 1.30pm – Employment Change, Trade Balance
Our View: The dollar remains under pressure following last week’s interest rate decision. Unless jobs data on Friday suggests otherwise, we could see the dollar continue to weaken further. The pound will be in the spotlight Thursday, where sentiment among MPC members may have changed following weaker economic data from the UK over the past month.
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