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News in Brief - 17/08/2017

GBP

Monex  
 

Solid labour market data caused a small rally for sterling against both the euro and the dollar, the former completely reversing by midnight while GBPUSD did manage to close slightly higher. Unemployment fell to just 4.4%, while average earnings ticked up 2.1% over the three months to June, compared to the same period a year ago. Nominal weekly earnings were up 2.8% year on year in June, significantly faster than recent months, although this is a very volatile series which is exactly why the 3m/YoY average is more widely reported on. It’s far too early to conclude that the spike seen in June is an indication of wage inflation returning to the UK, but is nonetheless a sliver of good data, which if replicated in coming months will suggest the BoE’s optimism on wage growth may ultimately be proved correct. Today at 09:30 BST monthly Retail Sales data will be released.

EUR

The euro took advantage of the broad dollar weakness seen yesterday evening to erase Tuesday’s loses for EURUSD. Eurozone Gross Domestic Product data showed the economy growing 0.6% in the second quarter, broadly in line with expectations. Year on year growth was 2.2%, with strong contributions coming from central and eastern European countries as well as Spain and the Netherlands. French unemployment fell to its lowest level since 2012, to 9.5%, in line with forecasts but still above euro area unemployment. Today at 10:00 BST eurozone Consumer Price Index data will be released alongside Trade Balance, and at 12:30 the European Central Bank’s latest meeting minutes will be out. The ECB is trying to work out how to acknowledge that improving fundamentals in the eurozone will eventually require tighter monetary policy without causing undue tightening in financial conditions, so the minutes are unlikely to give much away.

USD

USD sold off broadly yesterday after the latest meeting minutes from the rate setting Federal Open Market Committee showed division about when to begin to reduce the Fed’s balance sheet, which has been swollen by asset purchase programs. The USD weakness seen in the wake of the minutes may have been due to the increased concern policymakers expressed about soft inflation figures, which meant the committee could afford to once again be “patient” with further rate hikes. Today at 13:30 BST weekly Unemployment Claims will be released alongside the Philladelphia Federal Reserve’s Manufacturing Index, followed by Capacity Utilization and Industrial Production at 14:15 and the CB Leading Index at 15:00.

 
 
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UK News- 17/08/2017

FT: Fed divisions on show in latest minutes Some members were ready to announce unwinding of balance sheet in July. Federal Reserve policymakers were split over when to announce a start date for the US central bank’s unwind of its crisis-era stimulus and divided over what low inflation should mean for interest rates, according to the minutes of their last meeting. Several members of the Federal Open Market Committee were ready to announce a start date for shrinking the Fed’s $4.5tn balance sheet last month, but they were outnumbered by those who preferred to wait, the record of the July 25-26 meeting revealed. The minutes, released on Wednesday, were seen as slightly dovish by some economists, even if they did not significantly change the outlook for monetary policy. Coupled with the effect of fresh controversy over President Donald Trump’s remarks on Charlottesville, US bond yields and the dollar were lower on Wednesday.

Reuters: British consumers try to cut costs at fastest pace in two years More Britons tried to rein in their spending in the second quarter of this year than at any time since 2015 as rising inflation squeezed household incomes, according to a survey published on Thursday. Some 53 percent of Britons scrimped between April and June - the highest proportion since 56 percent did so during the same period of 2015, market research firm Nielsen said. This marked a swing back towards household cost-cutting over the course of the past year, which had been at its lowest level on record - 40 percent - in the two months after the Brexit vote in June 2016. But sterling's sharp depreciation in the immediate aftermath of the referendum - making imports more expensive - has pushed up shop prices at a time when wage growth is largely stagnant. Official data published on Wednesday showed that wage growth fell by 0.5 percent in real terms in the three months to June.

News in Brief - 16/08/2017

GBP

Sterling continued to weaken yesterday, avoiding falling below 2010’s low against the euro by a hair’s breadth. Price index data from the ONS showed Consumer Prices rising 2.6% year on year, unchanged from last month. Core CPI, which excludes volatile items like fuel, was also unchanged from last month. Both the readings were short of expectations, and sterling sold off on the news. Today at 09:30 BST the week’s second major raft of UK data will be released, with Labour Market figures including Unemployment and, crucially, the Average Earnings Index, which has been showing wage growth trend downwards in recent months. Expectations are low for earnings in particular, although this does mean the bar is low for a surprise to the upside.

EUR

The euro made further progress against sterling, but did weaken to USD after the release of strong US data in the afternoon, not quite managing to regain its losses afterwards. Italian Gross Domestic Product growth has already been released this morning at 0.4%, in line with expectations, although the Dutch GDP beat expectations showing a 1.5% quarter-on-quarter growth, the fastest pace since 2008. Eurozone Gross Domestic Product growth will be released at 10:00 BST, and is expected by many forecasters to show the eurozone economy growing at around 0.6% in the second quarter, the fastest quarterly rate of growth since 2011.

USD

The nascent USD rally that began with the release of Non-Farm Payrolls report earlier this month is beginning to build momentum this week, and the greenback strengthened further yesterday with the release of firm Retail Sales data in the afternoon. The retail data expanded by 0.6% in July, or 0.5% excluding automobiles, significantly more than expected, while there were strong upwards revisions to past figures. The Empire State Manufacturing Index was also released, and showed a strong improvement in business conditions reported by survey responders. Today’s US releases have the potential to be equally significant for USD, with Building Permits and Housing Starts due for release at 13:30 BST, followed by meeting minutes from the Federal Open Market Committee at 19:00 BST. Market expectations for the Fed’s next few meetings are at rock bottom. After senior member Bill Dudley earlier in the week made comments seemingly constructive for near term hikes tonight’s minutes will be closely examined for where the consensus on the committee lies.

UK News- 16/08/2017

FT: UK Brexit plan to leave Irish border free of customs posts Latest government paper aims to tackle one of thorniest issues of departure. Britain has proposed that the Irish border remain free of physical customs posts after the UK leaves the EU as part of government plans to tackle one of the thorniest Brexit issues. The proposal, contained in a position paper to be published on Wednesday, will raise questions about how Britain and the EU would control immigration and trade on either side of the 310-mile land border, which has nearly 300 formal crossing points. Theresa May’s government has begun detailing its negotiating positions on Brexit, ahead of a fresh round of talks on August 28. The European Commission has warned that the “clock is ticking”. On Tuesday, Britain said it would seek “a new customs partnership” removing the need for a new UK-EU customs border, or “a highly streamlined customs arrangement” using technology to smooth border traffic.

Reuters: ECB’s Draghi will not deliver fresh policy steer at Jackson Hole European Central Bank President Mario Draghi will not deliver a new policy message at the U.S. Federal Reserve’s Jackson Hole conference, two sources familiar with the situation said, tempering expectations for the bank to start charting the course out of stimulus. An ECB spokesman said that Draghi will focus on the theme of the symposium, fostering a dynamic global economy, in his Aug. 25 remarks, while the sources added that he was keen to hold off on the policy discussion until the autumn, as agreed at the last rate-setting meeting in July. Expectations for the speech had been building in recent weeks with investors pointing to next Friday’s event as the likely kick off in the ECB’s debate how to recalibrate monetary policy given solid growth, rapidly falling unemployment but persistently weak underlying inflation.

News in Brief - 15/08/2017

GBP

Sterling hovered near year lows against the euro yesterday, and weakened further against the US dollar, although GBPEUR has seen some upwards movement this morning. Reports emerged that the UK would be seeking to continue its current customs arrangement with the EU for several years after Brexit, according to a government paper that will be published today. Apart from a small bump against the euro this morning sterling has not reacted significantly, suggesting that perhaps a bigger question for the pound is not what the Government’s wish list consists of, but what the outcome of negotiations will actually be. Headline UK data will be released today at 09:30, with the Office for National Statistics releasing indices for Consumer, Retail, Producer and House Prices. After last month’s dip in year on year inflation brought the Consumer Price Index back into the Bank of England’s expectation range, a modest increase to 2.7% inflation in the CPI is expected.

EUR

The euro weakened to USD yesterday and has not managed to rally overnight. Yesterday Eurozone Industrial Production data showed production contracting 0.6% across the eurozone in June, after a 1.5% expansion previously. This morning’s data has included German Gross Domestic Product growth, which showed the EU’s biggest economy growing at 2.1% year on year, the fastest rate since 2014. The news comes as it is becoming increasingly clear that the European Central Bank is likely to begin to look to remove some of its current, extreme levels of monetary accommodation at some stage in the next 12 months. No further headline euro data will be released today, and a number of nations will observe the Assumption Day holiday.

USD

USD rallied on a broad basis yesterday, and has extended its gains this morning. New York Federal Reserve chief Bill Dudley said that he favoured another move upwards in interest rates this year, seemingly contradicting the recent tone of some of his Fed colleagues, and certainly contradicting the overwhelmingly dovish pricing of front-end US fixed income markets. Wage inflation remained key to Dudley’s outlook. And if Average Earnings growth indeed picks up towards the end of the year he is likely to be joined by a chorus of newly converted hawks at the Fed. The afternoon’s data will include Retail Sales and the Empire State Manufacturing Index at 13:30 BST, followed by Business Inventories and the NAHB Housing Market Index at 15:00.

UK News- 15/08/2017

FT: UK looks to retain Brussels customs deal Brexit paper seeks frictionless trade — but EU blessing may be needed for new trade talks. Britain will seek to continue its current customs arrangements with the EU for several years after Brexit, in a victory for supporters of a smooth transition. A government paper to be published on Tuesday makes clear that the UK wants to remain in a customs union with the EU for at least the estimated three years of transition after Britain’s 2019 exit. The plans appeared to be a victory for the chancellor Philip Hammond, the government’s leading advocate of a soft transition, and will reassure business leaders who have warned for months about the dangers of a “cliff edge” for exporters when Brexit takes place.

Reuters: Approaching a cliff edge? British business begs for clarity after Brexit maelstrom After the maelstrom of Prime Minister Theresa May's election crisis and a struggle in government over the shape of Brexit, business chiefs have a simple request for Britain: Give clarity on how the EU divorce might look. Since May nearly lost her job in a botched June 8 election gamble, ministers have sought to strike a more inclusive tone, even inviting in some chief executives to a 17th century manor house to discuss Brexit over a buffet lunch. But as the March 2019 exit date approaches, six major British business chiefs told Reuters they still do not have the answers about post-Brexit immigration, trade and regulation they need to plan and make coherent investment decisions.

News in Brief - 14/08/2017

GBP

Although sterling has started this morning little changed against the US dollar, it is perhaps a sign of market nervousness over the pound that it has started to trade in line with so-called “risk” currencies, in particular the Australian dollar. The theory is that when markets are confident, they tend to buy in to more volatile currencies, given the potential returns have historically been higher. However, when markets are nervous, they seek traditionally strong and stable currencies, such as the Swiss Franc or the Japanese Yen. Throughout the Eurozone crisis, the pound had at various times also served as such a haven for markets. However, even the Bank of England’s most hawkish member Michael Saunders, a man who has voted in favour of an interest rate hike at the past two rate-setting meetings, gave an interview on Friday saying that he believed the effect of Brexit would cost the UK “5 percentage points over a 15 year period” in economic growth. Combined with the UK’s bond market ever-diminishing in stature on the global stage, and a disconcerting run of economic data earlier this year, market confidence in GBP seems to be consistently sapping. Given that tensions continue to simmer between the US and North Korea, this opens up the possibility of yet further more GBP weakness should the situation escalate. Of course, a run of robust economic readings could change all this, and Tuesday provides the first opportunity for sterling to impress, with the release of the year-on-year Consumer Price Index measure of inflation.

EUR

The euro starts the week once more on the front foot, with the absence of any further data releases on Friday apparently simply providing an opportunity for markets to buy back in to the single currency. Although the euro hasn’t reached fresh highs against the USD dollar for almost a fortnight now, the longer term upward trend does still appear to remain very much intact. Moreover, the euro continues to pummel GBP, currently sitting only slightly above its 2016 low- leading several newspapers this morning to run articles on the prospect of EURGBP reaching parity before year end. With quarterly German inflation at the highest level since 2008, and Eurozone quarterly GDP growth the highest since 2011, if we see a good reading from tomorrow mornings Manufacturing and Service sector data releases, it could well help propel the euro to yet more fresh highs.

USD

The US dollar continues to be somewhat of a lame dog, with another underwhelming monthly inflation reading of 0.1% on Friday causing the currency to remain on the back foot against most of its major peers. With this being the fifth consecutive month that inflation has been below forecasts, and continued political uncertainty due to the strain with North Korea, US equities are also starting to suffer, ending the week down a cumulative 1.4%, which represents its worst performance since March. Nonetheless, with the “VIX” measure of equity volatility reaching its highest level this year, US retail sales and Federal Open Market Committee minutes published this week, and the global central bankers Jackson Hole Symposium set for this weekend, there is certainly scope for plenty of movement into the second half of the month.

News in Brief - 11/08/2017

GBP

Sterling continues to trade close to the bottom of its recent ranges, despite seeing a rally in the morning after some surprisingly firm Industrial Production data. Industrial Production rose 0.5% in June, driven partly by improved energy production. However, Manufacturing Production was less impressive, and changed 0.0% on the month. Following a large currency shock, the sort we saw in the aftermath of the referendum, adjustments in trade balance typically follow a “J-Curve”, at first getting worse before they improve. Of course, it’s a long way from economic theory to reality and the length of this adjustment process is highly variable and difficult to predict, but June’s data suggest we’re not quite at the bottom yet, to say the least.

EUR

The euro was out of the spotlight yesterday, but did end up closing up slightly against both USD and GBP. French Industrial Production fell short of expectations to shrink 1.1% in June, and Italy’s Trade Balance rose higher into surplus, but in general the data and news flow was subdued. This morning’s data has included German and French Consumer Prices, which changed 0.4% and -0.3% respectively in July.

USD

Bellicose rhetoric from Donald Trump on North Korea had a subdued effect on currency markets yesterday, although US equities did struggle and the index of implied volatility on S&P 500 options, VIX, did start to show signs of life after months near record lows. The Producer Price Index shrunk by 0.1% regardless of if energy was included, in a further sign that inflation remains sluggish in the United States. Today at 13:30 BST a more important inflation measure, the Consumer Price Index, will be released.

UK News- 11/08/2017

FT: Trump toughens warning to North Korea US president says Pyongyang ‘better get its act together’. Donald Trump stepped up his threats against North Korea on Thursday, declaring that he may not have been “tough enough” in his earlier warning to Pyongyang that the US would deploy “fire and fury like the world has never seen” if the country did not abandon its nuclear ambitions. “If anything, maybe that statement wasn’t tough enough,” Mr Trump told reporters ahead of a national security briefing at his New Jersey golf club, where he is on what the White House says is a working vacation. But he also said his administration would “always consider negotiations”. After the remarks, the 10-year Treasury yield dipped 4 basis points to a two-month low of 2.2 per cent as investors sought the safety of US government debt. The S&P 500 ended down 1.45 per cent at a one-month low of 2,438.

Reuters: Dudley reinforces Fed expectation of U.S. inflation rebound.  The Federal Reserve expects "very weak" U.S. inflation to rebound thanks to a slide in the dollar and to a labor market that keeps getting hotter, one of the Fed's most influential officials said in comments that reinforce its gradual policy-tightening plan. In a speech on Thursday calling on the United States to do more to curb growing racial inequality of employment and income, New York Fed President William Dudley suggested the central bank was on track to raise interest rates once more and begin shedding some bond holdings this year. Investors are somewhat skeptical that the Fed will deliver another rate hike by December, given that its preferred annual inflation reading in recent months has fallen to, and remained at, 1.5 percent, which is below a 2-percent target.

News in Brief - 10/08/2017

GBP

Sterling saw a brief rally against USD yesterday before falling back to levels comparable to yesterday’s open as of the time of writing. This morning the Royal Institute of Chartered Surveyors released its House Price Balance, which fell to just 1%, meaning that the balance of surveyors reporting house price increases in their area over those reporting price falls was just 1%. Low stock numbers, political and uncertainty, and tax changes were the three main factors cited by the RICS. Today at 09:30 BST the latest Industrial Production, Goods Trade Balance, and Construction Output figures will be released for the UK. Manufacturing Production is expected to at least be flat after the 0.2% fall seen last month, which contradicted relatively optimistic surveys from the sector.

EUR

EURUSD was exciting for one glorious 45 minute period yesterday, when the pair saw a sharp swing to the downside with no immediately apparent cause. The move quickly retraced its steps upwards, but nonetheless set the month’s low for EURUSD. Yesterday’s data included a better than expected reading for Italian Industrial Production. French Industrial Production was not as impressive this morning, and contracted by 1.1%.

USD

With “bellicose rhetoric” still in reserve for later this week, the Monex team is once again struggling to come up with metaphors for the ongoing exchange of threats between North Korea and the United States. USD appears to have taken the developments of the last 24 hours in its stride, and is trading slightly up overnight on a broad basis. Yesterday’s data included higher than expected Non-Farm Productivity Growth, and lower than expected Unit Labour Cost Growth for the second quarter. Today’s fundamental data may prove more decisive for the greenback, with the Producer Price Index due for release at 13:30 BST alongside weekly unemployment claims. Producer prices are a direct leading factor for consumer prices, and expectations are for a modest 0.1% increase, meaning the bar is rather low for a beat. The Federal Reserve’s Bill Dudley will speak at 15:00 BST afterwards.

UK News- 10/08/2017

FT: North Korea escalates threat as Tillerson seeks to ease tensions Pyongyang plans firing four missiles towards Guam bases in game of brinkmanship. North Korea said it was considering launching four ballistic missiles to fall near US military bases on the Pacific island of Guam to “interdict” American forces, escalating tensions that US secretary of state Rex Tillerson had sought to ease. The Korean People’s Army said it was “seriously examining the plan for an enveloping strike at Guam through simultaneous fire of four Hwasong-12 intermediate-range strategic ballistic rockets,” state-run news agency KCNA said. This would be “in order to interdict the enemy forces on major military bases on Guam and to signal a crucial warning to the US”. US President Donald Trump on Tuesday warned that further threats from North Korea would be met with “fire and fury like the world has never seen”, although officials later played this down.

Reuters: UK house price growth weakest in over four years - RICS British house prices rose at their slowest rate in over four years last month, while the number of sales slowed due to a limited supply of property and continued political uncertainty, a property industry body said on Thursday. The Royal Institution of Chartered Surveyors (RICS) said its monthly house price balance dropped to +1 in July from +7 in June, its lowest since March 2013 and below all forecasts in a Reuters poll of economists. The outlook for prices over the next 12 months was also the weakest since just after last year's vote to leave the European Union, RICS added, though outright price falls seemed unlikely at a national level. "There is no real indication that the housing market will become materially more affordable anytime soon," RICS chief economist Simon Rubinsohn said.

News in Brief - 09/08/2017

GBP

Safe haven assets were well bid overnight and sterling sold off, as the latest tensions between North Korea and the United States provided the wrong kind of impetus for market movement. No top shelf UK data was released yesterday, but the additional sterling weakness seen in the wake of the turbulent political developments was sufficient to send sterling to fresh lows against USD and the euro, although the moves have since reversed this morning. No headline sterling data will be released.

EUR

The euro fell sharply against USD yesterday, echoing the price action seen in the wake of US Friday’s Non-Farm Payrolls report and further suggesting that EURUSD buyers may finally be seeing their conviction fade slightly and a reversal or period of retrenchment may be ahead for the pair. Euro data yesterday included better than expected prints for German and French trade balance. Today at 09:00 Italian Industrial Production figures will be released.

USD

USD strengthened broadly yesterday, as more firm labour market data was released and sabre rattling continued between nuclear states North Korea and the USA. After Friday’s strong Non-Farm Payrolls report, yesterday’s move on USD was triggered by another item of labour market data, the Job Openings and Labour Turnover Summary, which showed job openings at a series high, firm evidence for a tightening labour market. However, given the Federal Reserve’s caution in judging the inflationary potential of the economy, the tight labour market is likely to need to translate into higher wages and higher inflation before steeper monetary tightening becomes a prospect. Today at 13:30 BST Non-Farm Productivity and Unit Labour Costs will be released, followed at 15:00 by Wholesale Inventories.

UK News- 09/08/2017

FT: North Korea threat after Trump vows ‘fire and fury’ Kim Jong Un said to be considering strike on Guam. North Korea said its leader Kim Jong Un was weighing whether to strike the US Pacific territory of Guam, just hours after Donald Trump vowed to meet threats made by North Korea “with fire and fury like the world has never seen”. The comments, released via North Korea’s state news agency, appear to escalate a dangerous game of chicken as the US struggles to bring the nuclear aspirant and its rapidly developing missile programme into line. The Korean People’s Army said the strike plan would be “put into practice in a multi-current and consecutive way any moment” once the supreme leader had made a decision about targeting the small island territory of fewer than 200,000 people, which lies south of Japan.

Reuters: Bank of England says Brexit transition desirable for UK, EU banks The Bank of England said a transition period after the Britain leaves the European Union would give banks more time to make orderly changes as Brexit poses risks to financial stability. With UK due to leave the bloc in March 2019, the BoE's Prudential Regulation Authority (PRA) said it faces heavy demands from Brexit fallout on banks and insurers. BoE Deputy Governor and PRA Chief Executive Sam Woods said "some form of implementation period is desirable" between Britain leaving the bloc and start of new trading terms to "give UK and EU firms" more time to make necessary changes.

News in Brief - 08/08/2017

GBP

Sterling recovered its lost ground from yesterday morning’s move against the US dollar yesterday, though continues to struggle against a euro, touching a fresh 10 month low yesterday. The UK economy had some encouraging news, as Halifax’s House Price Index rose 0.4% in July, which was welcomed by markets after the sharp fall in June that had taken year on year price growth down to 2.1%. Nonetheless, Halifax Managing Director Russell Galley said stamp duty and the Brexit spending power squeeze had contributed to weak demand in the sector. The British Retail Sales Consortium’s Retail Sales Monitor was released overnight, and showed year on year sales growth slowing to 0.9%. Elsewhere, the Recruitment and Employment Confederation reported that employers were facing a shortage of staff as the availability of workers fell sharply in July.

EUR

The euro once again made fresh highs against sterling yesterday, and after trading mostly flat against USD yesterday appears to have regained a modicum of momentum overnight. German Industrial Output fell sharply in June, registering its biggest drop of the year after several months of expansion had led analysts to believe the sector would instead grow by 3.7%. Sentix Investor Confidence, a widely followed sentiment survey of investors and analysts, showed a marginal fall in reporter confidence in yesterday’s release. This morning’s data has included Trade Balances for Germany and France, with Germany’s surplus larger than expected and France’s deficit smaller than expected.

USD

USD has shown some signs of resistance to resuming its downwards path this week, but weakened overnight against the euro. Minneapolis Federal Reserve President Neel Kashkari made comments on Twitter that suggested Friday’s labour market report did not necessarily mean the Federal Reserve was more confident about the inflation outlook, describing the report as “more of the same”. Elsewhere Kashkari’s Fed colleague James Bullard, who is not voting on monetary policy this year, said that he believed interest rates should remain unchanged in the immediate future. The two bankers’ dovish statements are consistent with market pricing of short term interest rate futures, which does not reflect significant chances of a hike in the near term. Today at 11:00 BST the NFIB Small Business Index will be released, followed at 15:00 by the Job Openings and Labour Turnover Summary.

UK News- 08/08/2017

Reuters: UK recruiters blame Brexit as staff shortage worsens - REC A shortage of staff for British employers worsened in July, hurt by the departure of European Union workers after last year's Brexit vote, a group representing recruitment agencies said on Tuesday. The Recruitment and Employment Confederation (REC) said the availability of staff overall suffered its biggest fall last month in a year and a half. "The parts of the economy most reliant on European workers are under even more pressure as many EU workers return home," REC Chief Executive Kevin Green said. "Employers are not just struggling to hire the brightest and best, but also people to fill roles such as chefs, drivers and warehouse workers." London in particular was feeling the strain, with hiring growing at a slower pace than anywhere else in Britain.

BBC: Wage squeeze to get tighter The big squeeze on incomes will get tighter from here and will last longer than previously thought. At the moment, prices are rising 2.6% while wages are rising just 2%. That gap is expected to widen later this year. Inflation is expected to peak at around 3% in October, as the surge in import prices caused by the post-Brexit-referendum drop in the pound continues to feed through to shop prices.

News in Brief - 07/08/2017

GBP

GBPUSD is back nearer the bottom of its two week trading range after the US dollar finally showed signs of life after some good domestic data on Friday, although that trading range still remains the highest the pair has been over the past year. This week’s calendar is far less exciting in terms of fundamental data than last week’s, with this morning’s only release of note the Halifax House Price Index, which increased 0.4% in July, slightly above expectations. Later in the week Industrial and Construction Output data will be released alongside the Goods Trade Balance on Thursday.

EUR

The euro finally pared back some of its recent gains versus the US dollar on Friday, and has failed to recover the majority of its losses as of this morning. There’s been much chatter among currency strategists about the euro being overbought after this year’s spectacular 15% rally, and so this week will prove crucial for EURUSD in particular for judging how much momentum the single currency retains. This morning’s data has included German Industrial Production, and Sentix Investor Confidence will be released at 09:30 BST.

USD

After hard losses earlier in the week, Friday’s Non-Farm Payrolls report bought USD some breathing room, and the greenback rallied on Friday, retaining most of its gains through to this morning. Headline job creation beat expectations and reached 209,000 in July, while wages also grew faster than expected and labour force participation increased, making it a good report overall. Today the Federal Reserve’ Labour Market Conditions Index will be released at 15:00 BST, followed by a speech from the Fed’s Neel Kashkari at 18:25 and Consumer Credit at 20:00. Later in the week, Producer Prices will be released on Thursday, followed by Consumer Price Index data on Friday.

UK News- 07/08/2017

FT: China says North Korean missile threat reaching ‘crisis point’ US and S Korean presidents affirm Pyongyang poses ‘grave’ direct threat in phone call. China’s foreign minister warned his North Korean counterpart that the situation on the Korean Peninsula was close to “crisis point”, a day after the UN unanimously voted for its strongest economic sanctions yet against Pyongyang. Hours later, the South Korean president requested a phone call with US President Donald Trump on Sunday night, in which the White House said both leaders affirmed that North Korea posed “a grave and growing direct threat to the United States, South Korea, and Japan”. The White House said Mr Trump and Mr Moon welcomed the new UN resolution and “committed to fully implement all relevant resolutions and to urge the international community to do so as well”.

Reuters: UK house price growth weakest in more than four years - Halifax British house prices rose at their slowest pace in more than four years in the three months to July as households felt the pinch of inflation which is rising faster than wages, mortgage lender Halifax said on Monday. Average house prices in the period were 2.1 percent higher than a year earlier, slowing from a 2.6 percent increase in June's figures and down from growth of more than 8 percent in July last year, Halifax said. Economists in a Reuters poll had expected a 2.0 percent rise.

News in Brief - 02/08/2017

GBP

GBP. Sterling traded flat against USD yesterday, and pared back its recent losses to the euro. The day’s two data releases both beat expectations, with mortgage lender Nationwide’s House Price Index rising 0.3% in July and the Markit Manufacturing Purchasing Managers’ Index rising from last month’s level against expectations. New export orders almost reached a record high for the survey, boosting optimism about the future in the sector while job creation and output levels also increased. The British Retail Consortium’s Shop Price Index was released earlier this morning, and fell 0.4% year on year, suggesting that inflationary pressure had subsided for now in the surveyed member stores. Today at 09:30 BST Construction PMIs will be released.

EUR

The euro saw its recent gains versus USD decay slightly over the course of yesterday’s session, but has opened this morning on a firmer note. Manufacturing Purchasing Managers Indices for various eurozone economies were released, and ranged from 54.0 in Spain to 58.1 in Germany, all well above the 50 level that indicates overall reported growth. The Flash reading of eurozone Gross Domestic Product growth for the second quarter showed the economy growing 0.6%, as expected. At 10:00 BST the Producer Price Index will be released.

USD

The greenback showed tentative signs of strength overnight against several emerging market currencies, as well as the Kiwi dollar, but remains on the back foot against the euro and sterling. Yesterday’s much awaited release of the Personal Consumption Expenditures Price Index turned out to be something of a non-event. The inflation measure, which is preferred by the Federal Reserve over other comparable indices, rose 1.4% year on year, down from 1.5% in May. The Core index, which excludes food and fuel, rose 1.5%. All in all the data contained insufficient evidence of reflation to move USD significantly. Later in the afternoon Manufacturing Purchasing Managers Indices were released by Markit and ISM, both showing the sector growing at a steady rate. Interestingly, the ISM Manufacturing Prices Index increased substantially. Today at 13:15 BST ADP’s estimate of monthly Non-Farm Payroll growth will be released.

News in Brief - 01/08/2017

GBP

Sterling and other major currencies appreciated sharply against USD at 4pm yesterday, in dramatic price action reportedly linked to end of month trading. Yesterday’s main release for the UK was the Bank of England’s Money and Credit report for June, which showed headline M4 money supply contracting by 0.2% month on month, while mortgage approvals remained steady and the various measures of household lending continued to show expansion in consumer debt. The amount borrowed by households through credit cards, loans and overdrafts reached £200bn for the first time since 2008. Today at 09:30 BST, the latest Manufacturing Purchasing Managers’ Index data will be released.

EUR

The euro was another benefactor of USD weakness during trading around the 4pm London fix, and the single currency also had a few bursts of strength against sterling. Yesterday’s key data release was the flash estimate of eurozone Core Consumer Price Index in July, which beat estimates to rise 1.2% year on year, a slight acceleration from last month. Eurozone Unemployment also fell to 9.2%, the lowest level since February 2009. German Retail Sales expanded 1.1% in June, almost double May’s rate, while Italian Unemployment fell faster than expected, rounding off a morning of solid eurozone data. The Eurozone Manufacturing Purchasing Managers Index was released today at 56.6, broadly in line with expectations. Today at 10:00 BST the flash estimate of eurozone Gross Domestic Product growth will be released.

USD

USD was sold heavily yesterday, as a sharp dip around 4pm end of month trading seemed to compound the overall bearish sentiment for the currency. While House Communications Director Anthony Scaramucci was sacked after a week in the role, in yet another dramatic personnel change from the Trump Administration. Yesterday’s data did little to help USD, despite Pending Home Sales jumping 1.5% in June. Today at 13:30 BST Personal Spending and Income data will be released alongside the Personal Consumption Expenditures Price Index, an important measure of inflation that is favoured by the Federal Reserve. Manufacturing Purchasing Managers Index data will be released by Markit and ISM at 14:45 and 15:00, and Total Vehicle Sales will also be released today.

UK News- 01/08/2017

FT: Brexit set to raise UK banks’ costs 4% and capital needs 30% Most detailed assessment yet comes amid risk of resources shift to US and Asia. Brexit will push up costs for banks by as much as 4 per cent and their capital requirements will rise up to 30 per cent, according to the most detailed assessment yet of what Britain’s departure from the EU means for the sector. The findings by consultants Oliver Wyman will make grim reading for its bank clients, many of which are struggling with low profitability. They come a day after HSBC became the first lender to put a price tag on Brexit, saying the immediate disruption would cost it $200m-$300m. Stuart Gulliver, chief executive of HSBC, said $1bn of revenue in its global banking and markets unit would be put “at risk” by Britain leaving the EU. But he said it planned to protect this revenue by moving up to 1,000 of its 6,000 UK investment banking jobs to France.

Reuters: Britain's statistics watchdog puts stamp of approval on CPIH inflation gauge Britain's statistics watchdog on Monday put its stamp of approval on CPIH, the gauge of inflation preferred by official statisticians, following improvements to address quality concerns. The Office for National Statistics (ONS) first published CPIH, a measure that includes more housing costs, as an official statistic in 2013. But the body which supervises the ONS said in 2014 that it fell below acceptable quality standards, in part because of concerns about the way it measures owner-occupier housing costs, based on rental prices. On Monday, the UK Statistics Authority said it was now satisfied that the ONS had rectified this.

News in Brief - 31/07/2017

GBP

Sterling made serious inroads against USD last week, and is holding on to its progress fairly well this morning, having only slightly come off Friday’s highs. It’s been a different story against the euro, which has also been rallying against the greenback, keeping GBPEUR hovering above multi year lows. Sterling’s relatively good performance faces some major tests this week, with the release of the closely watched Purchasing Managers Indices for three key UK economic sectors. The releases begin on Tuesday with Manufacturing PMI, followed by Construction data on Wednesday, and Service sector data on Thursday. Thursday will also see the Bank of England’s latest Inflation Report, rate decision, meeting minutes, and a press conference given by senior BoE decision makers, so it’s likely to be a busy week for the pound.

EUR

The euro achieved post-quantitative easing highs against USD last week, and has pared back those gains only slightly as of this morning. Friday’s data further highlighted the firm economic conditions that have underpinned the euro’s recovery, with French and Spanish Gross Domestic Product growth posting firm prints, while German Consumer Price Index inflation doubled expectations. This week will have plenty of euro data, including a few headline data prints. Today at 10:00 BST eurozone Consumer Price Index inflation will be released, accompanied by the Unemployment Rate.

USD

Friday’s Gross Domestic Product Growth data for the second quarter did little to help the greenback after a week of losses, as although GDP grew at a healthy 2.6% annualised rate, there was little evidence of the sort of inflationary pressure that might prompt a hawkish Federal reserve to revise its current, ultra-cautious approach to monetary policy. Crucially, the Employment Cost Index rose only 0.5%, down from 0.8% last quarter. This will be a busy week for the US data calendar, beginning with the Chicago Purchasing Managers Index at 14:45 today and Pending Home Sales at15:00. Further PMIs will be released on Tuesday and Thursday, and on Friday the monthly Non-Farm Payrolls report will be released.

UK News- 31/07/2017

Reuters: UK will not cut taxes below European average after Brexit Britain does not intend to lower taxes far below the European average in order to remain competitive after Brexit but rather expects to keep a recognisably European economic and social model, finance minister Philip Hammond said. Hammond himself had suggested in January that Britain may have to change its economic model to remain competitive in the event that it left the European Union without having secured an agreement on market access. Hammond, who had campaigned for Britain to remain in the EU ahead of last year’s referendum, is seen as a proponent of a relatively “soft Brexit”, sometimes putting him at odds with cabinet colleagues who yearn for a cleaner break with the bloc.

Reuters: UK companies’ optimism on economy slips to six-month low – Lloyds British businesses are their least optimistic about the economy in six months and their overall confidence levels remain slightly below average, a survey showed on Monday, adding to a lacklustre outlook for the economy. Lloyds Bank said its survey pointed to moderate growth although there had been some improvement from a month earlier, just after Prime Minister Theresa May unexpectedly failed to win a parliamentary majority in a national election. “Confidence remains just below the long-term average and is consistent with a moderately positive pace of economic expansion,” said Hann-Ju Ho, a senior economist for Lloyds.

News in Brief - 28/07/2017

GBP

Sterling began to pare back its gains versus the US dollar yesterday, although this morning’s trading levels remain above Thursday’s open. Price action against the euro has basically been flat this week, suggesting that for now sterling may have finally found some support against the single currency. The Confederation of British Industry’s Realised Sales index, a survey measure of reported sales volumes, rose to its highest level since the April retail sales boost, suggesting that UK consumers may be shrugging off falling real incomes. However, overnight the GfK Consumer Confidence Index fell to its lowest level since the EU referendum, painting a conflicting picture of the health of the economy.

EUR

After a short lasted break yesterday which saw the euro give back some of the recent gains against the dollar, the single currency is again assaulting recent multi-year highs after today’s data in the eurozone showed very positive growth figures in Spain and France. France is enjoying the longest growth streak since 2011, and Spain grew at the fastest pace since 2015, becoming the best performing economy among the four biggest economies of the single currency area.

USD

The composite dollar index DXY reached a fresh low yesterday morning, but has pared back its losses slightly since then as USD has posted minor rallies against GBP and EUR. The US Government and Legislature remained a source of turmoil and comedy, as the Senate once again failed to pass repeal legislation of Obama’s signature healthcare reform. Elsewhere, newly appointed White House Communications Director Anthony Scaramucci went on an expletive ridden rant about other senior administration figures. Although USD saw little reaction overnight, the lack of political cohesion – or even basic legislative function, may well be contributing to prevailing bearishness on USD. Yesterday’s Durable Goods Orders data was fairly strong, with headline Orders rising a whopping 6.5% in June. Today at 13:30 BST preliminary US Gross Domestic Product growth data will be released, with the median forecast on Bloomberg being for an annualised growth rate of 2.7%.

UK News- 28/07/2017

FT: Senate rejects last-gasp Obamacare repeal bill Trump legislative agenda dealt big blow after McCain-led rebellion on ‘skinny’ repeal. The seven-year Republican quest to scrap Obamacare was left all but dead early on Friday morning after party leaders lost a Senate vote showing they were unable to use their control of Washington to overhaul the US healthcare system. In the biggest legislative blow to President Donald Trump to date, Republican John McCain of Arizona, who returned to Washington this week having been diagnosed with brain cancer, cast the decisive vote to kill off his party’s last-gasp effort at healthcare reform. The failure after a night of political drama leaves Mr Trump unable to deliver on his signature electoral pledge to repeal Barack Obama’s Affordable Care Act and with no clear path to a significant legislative win in his volatile six-month-old presidency.

Reuters: UK consumer morale slips as economic mood hits four-year low – GfK British consumer morale has sunk back to depths hit just after last year’s Brexit vote and worse may be to come as households’ view of the broader economic situation dropped to a four-year low, according to a survey on Friday. Market research firm GfK’s consumer confidence index fell to -12 in July from -10 in June, a one-year low and slightly below the median forecast in a Reuters poll of economists. The figures are likely to strengthen the conviction of Bank of England officials who want to keep interest rates on hold ahead of next Thursday’s policy decision. “All bets must now be on a further drift downwards in confidence,” said Joe Staton, head of market dynamics at GfK.

News in Brief - 27/07/2017

GBP

Yesterday’s volatility triggered by the US Federal Reserve’s latest rate statement sent sterling higher against USD, but also created some short lived weakness against the euro. There had been little action in the morning for the pound, with the release of preliminary Gross Domestic Product Growth for the second quarter showing that the economy had grown 0.3% compared to Q1, and an annualised rate of 1.7%, as expected. The improvement seen in the retail sector was clearly the main driver of the economy. However, this is concerning given that real wages remain in contraction and we’ve already seen several wobbles in retail sales this year. Despite optimism in sector survey data, manufacturing failed to make a positive contribution to GDP growth, although recent surveys do indicate that this may change in the second half of the year. Given the significance of retail sales in the economy’s momentum at the moment, today’s release of the Confederation of British Industry’s measure of Realised Sales will take on additional importance.

EUR

No headline euro data was released yesterday, but that was no barrier to further explosive euro strength against the US Dollar. The single currency surged to a post-quantitative easing high against the greenback, rounding off a spectacular rally since reaching multi decade lows at the start of the year. This morning’s data has already included GfK German Consumer Climate, which rose further into the positives on its latest survey reading, and Spanish Unemployment, which plummeted to 17.2%, compared to 18.8% last month. The figures from Spain are a particularly good indicator that the economy is moving in the right direction, as it is the lowest rate of unemployment since 2009, and down from a 2013 high of 27.2%.

USD

Some marginal changes in the Federal Reserve’s rate statement were enough to send the US dollar into yet another dramatic selloff last night. The Federal Reserve’s rate statement, which accompanied its decision to leave rates unchanged, once again strongly suggested that it would begin normalising its balance sheet as early as September. However, in discussing inflation, the Fed noted that its target measures were running below target, compared to previous statements which described it as “somewhat” below. The omission was sufficient for markets to conclude the statement as a whole was dovish, and US equity markets soared to fresh new highs while the weighed US dollar index DXY fell to fresh 14 month lows. Important US data will be released today in the form of Durable Goods Orders and the Goods Trade Balance.

UK News- 27/07/2017

FT: Dollar at 14-month low on dovish signals from Fed Investors brush aside imminent balance sheet shrinking to dwell on inflation outlook. The dollar slid to a 14-month low and Wall Street stocks hit new highs after a dovish tone from the Federal Reserve allowed investors to push back rate-rise bets and extend the recent risk-taking mood. Markets brushed aside the Fed’s signal that it would begin shrinking its balance sheet as soon as its next meeting in September — essentially another form of monetary tightening — and chose to dwell instead on the Fed’s tacit acknowledgment that inflation remained softer than it had expected. “Nothing in this statement changes Pimco’s view that a third rate hike this year is far from a done deal,” said Richard Clarida, global strategic adviser at the California-based fund manager. “If there is no rebound in core inflation between now and December, the next rate hike may be a decision for the next Fed chair, if Janet Yellen is not reappointed.”

FT: Rudd promises to keep door open for EU workers after Brexit UK home secretary breaks silence on migration as part of drive to soften exit terms. Amber Rudd, the home secretary, promised business on Thursday that she would not close the door to European workers after Brexit, in a significant softening of the government’s tone on EU migration. Ms Rudd, writing in the Financial Times, urged companies to put their case for a liberal migration regime and said she shared the desire of business “to continue to welcome those who help make the UK such a prosperous place to live”. More than a year on from the referendum vote to leave the EU, Ms Rudd has finally broken her silence on the future immigration system, telling employers they will have up to three years of transition to adjust their recruitment practices once Britain has left the bloc in 2019.

News in Brief - 26/07/2017

GBP

Sterling saw a short lived burst of strength against the US dollar yesterday afternoon that has since dissipated to leave GBPUSD trading slightly lower than yesterday’s open. The Confederation of British Industry’s Industrial Order Expectations index was released yesterday, and rose from a reading of 1 to a reading of 10, indicating a strong increase in incoming orders. The survey of just under 400 manufacturers also found head count rising at the fastest rate in three years. Today at 09:30 BST preliminary Gross Domestic Product growth for the second quarter will be released, coming at a crucial time for the pound which is hanging on for dear life against the euro and only resisting USD due to the greenback’s own weakness. Median expectations for the release are for 0.3% growth, a marginal improvement on last quarter’s 0.2%. Survey data suggests that this estimate is conservative, or even low, while hard economic data that have already been released for the quarter suggest it is too optimistic. The real release at 09:30 is therefore something of a wild card and has the potential to move sterling significantly.

EUR

The Monex team is running out of pithy one liners for describing euro strength, but the single currency knocked down yet another door against USD yesterday. EURUSD rose to within two pips of the highest level on EURUSD since the commencement of the ECB’s main quantitative easing effort, before falling back slightly. The German IFO Business Climate survey may have been behind some of the momentum, after the index rose to a record high and IFO’s Chief Economist described businesses as “euphoric”. No headline euro data will be released today, but the single currency is not short of momentum at present.

USD

USD saw a major selloff in the afternoon yesterday, but has since recovered somewhat. Some rather punchy Consumer Confidence figures helped the dollar recover, as the index approached a 16 year high. Sub-indices tracking perceptions of the job market made the case for US dollar strength in stark terms: the percentage of those saying jobs were “plentiful” outstripped those saying employment was “hard to get” by 16.1 points, the highest margin since 2001. Despite the increasingly robust health of the labour market, wage inflation has yet to take off in the US, as in the rest of the developed world. The Federal Reserve must grapple with this conundrum, which challenges decades old economic models that underpin conventional monetary policy, and must do so at this week’s meeting. The Fed’s latest rate decision will be announced at 19:00 BST tonight, alongside a revised statement. Given the recent slowdown in headline inflation and the lack of acceleration in wage growth, little change to the statement is likely, and the chance of a rate hike is negligible.

UK News- 26/07/2017

FT: UK business secretary rules out post-Brexit protectionism. Greg Clark, Britain’s business secretary, insisted that nobody voted for Brexit to “trade less”, as he stepped up his joint campaign with chancellor Philip Hammond to keep borders open when Britain leaves the EU. Mr Clark celebrated the UK’s complex supply chains as “a triumph of 21st century industry” and said there was no question of retreating to be “a Good Life Britain of self-sufficiency”. The quietly spoken minister has in recent weeks worked closely with Mr Hammond to push the cabinet towards a more business-friendly path to Brexit, including a transition deal lasting for two or more years after exit in March 2019.

Reuters: UK factory output rises at fastest pace since 1995 – CBI. British factories increased output at the fastest rate since the mid-1990s over the past three months, according to a survey published on Tuesday that suggested manufacturing might help to support the economy as it slows during 2017. Manufacturing accounts for about one-tenth of Britain’s economic output. The Confederation of British Industry’s quarterly balance for manufacturing rose to +31 in the three months to July, the highest reading since January 1995 and up from +22 in the three months to April. In July alone, however, new orders slowed slightly more than expected, to +10 from +16 in June.

News in Brief - 25/07/2017

GBP

Sterling traded up against EUR and USD yesterday, amid soft data in the eurozone and still escalating political tension in the US. No major sterling moving headlines were released, although the Office for National Statistics released data on “shrinkflation”, the phenomenon of shrinking package sizes for items. The analysis showed that thousands of items have been subject to the phenomenon for years, but interestingly that Brexit was not a noticeable factor in accelerating the trend. Yesterday’s only other major development was the International Monetary Fund downgrading its forecast for growth in 2017 to 1.7% – hardly a surprise for anyone who has been paying even the slightest attention to recent UK data. Today at 11:00 BST the Confederation of British Industry will release the results of its Industrial Order Expectations survey.

EUR

Yesterday’s slightly soft survey data appeared to cause the single currency to waver somewhat, with EURUSD and GBPEUR both reflecting marginal euro weakness. The Purchasing Managers Indices for the Manufacturing and Services sectors in France, Germany and the eurozone all remained solidly in growth territory, but almost all fell short of expectations. However European Central Bank Executive Board member Yves Mersch made some interesting comments in a speech, saying that advances in technology which reduce costs in areas like IT and logistics may be holding down inflation, although he did expect steady increases in price pressure over the next few years. Mersch also said the labour market may prove capable of generating inflation earlier in the eurozone recovery than previously expected. This has hardly been the experience in the UK and US, where inflation has remained stubbornly low even as unemployment has plunged to multi decade lows. Today at 09:00 BST the widely followed IFO Business Climate Survey will be released for Germany.

USD

USD had a uneventful start to the week overall, drifting slightly lower against GBP while falling back from multi year lows against the euro. A lack of any major new constitutional or political drama may have been a factor, after a week of escalating turmoil engulfing the Trump administration. A number of US data releases are scheduled today, ahead of tomorrow’s important rate announcement from the Federal Reserve. House Price Indices from S&P as well as the FHFA will be released at 14:00 BST, followed by CB Consumer Confidence figures at 15:00 and the Richmond Manufacturing Index.

UK News- 25/07/2017

Reuters: It's official - sweet-toothed Britons hit hardest by 'shrinkflation' Over 2,500 household items are smaller now than they were in 2012, the Office for National Statistics said in a report on the trend among food producers and other manufacturers of offering consumers less for the same price in response to higher raw material costs. However, the impact on Britain's official inflation measures was only noticeable for sugar, jams, syrups, chocolate and confectionary, contributing 1.22 per cent to the rate of inflation of sweet items since 2012. Brits with a sweet tooth might find the news a bit hard to swallow. It comes after cuts over the past year to the size of some of the UK's favourite chocolates, including Toblerone and Mars products such as Maltesers. The ONS also said there was no noticeable change after last year's referendum decision to leave the European Union which hit the value of the pound and made imports more expensive. Shrinkflation existed before the Brexit vote with manufacturers putting it down to the rising cost of raw materials, it said.

Reuters: UK households face sharpest squeeze in three years - IHS Markit British households' financial situation has deteriorated at the fastest rate in three years this month, as families increasingly shy away from big purchases like cars, holidays and household appliances, a survey showed on Monday. Financial data company IHS Markit said its monthly Household Finance Index dropped to 41.8 from June's 43.7, its lowest since July 2014, reflecting an ongoing squeeze on household incomes as inflation rises faster than wages. "There are signs that squeezed household budgets and worries about earnings have started to spill over to consumer spending patterns," said Tim Moore, a senior economist at IHS Markit.

News in Brief - 24/07/2017

GBP

Sterling weakened against both USD and EUR last week, but managed to put up some modicum of resistance against the greenback towards the end of the week, including Friday. This will be a quiet week for the pound, apart from one headline release in the form of Preliminary Gross Domestic Product data for the second quarter on Wednesday. The Monetary Policy Committee’s Chief Economist and provocateur in chief, Andy Haldane, will speak on Tuesday in London. Although the topic of the speech is not directly monetary policy, after Haldane recently made comments in favour of near term rate hikes the potential for sterling relevant comments should not be discounted.

EUR

The euro found little if any resistance among G10 currencies last week, and made significant advances against both USD and GBP. EURUSD is now within spitting distance of its highest level since early 2015, when the ECB first began large scale quantitative easing. This will be a busy week of euro data, which has already begun with the release of French Manufacturing and Services Purchasing Managers Indices. Both the PMIs showed a strong level of activity growth. The equivalent European indices showed a slight slowdown, yet very strong reading, for the manufacturing PMI, and a solid release for the services PMI. Later in the week, A raft of GDP and inflation figures will be released for French, Germany and Spain on Friday.

USD

USD was already selling off before the latest intensification of political turmoil, but last week’s news that special counsel Robert Mueller was expanding his investigation into the Trump Administration’s contacts with Russia appeared to once again worsen the prevailing bearish mood for USD. Today Trump’s son in law Jared Kushner will meet behind closed doors with the Senate Intelligence Committee, which has also taken an active interest in Russian interference with the US electoral process. This will be a busy week for the US data calendar, which may provide some relief (or damnation) for USD. Today at 14:45 BST Markit Purchasing Managers Indices for Services and Manufacturing will be released, followed by the latest FOMC decision on Wednesday night, where no change is expected to monetary policy or forward guidance. Durable Goods orders will be released on Thursday, followed by Gross Domestic Product data on Friday.

UK News- 24/07/2017

FT: IMF lowers UK GDP forecast to 1.7% amid Brexit uncertainty Britain suffers biggest downgrade for advanced economy in latest forecasts by fund. The International Monetary Fund has downgraded its forecast for Britain’s economy, describing its recent performance as “tepid”. In a summer update to its twice yearly forecasts, the fund said the UK economy was slowing and likely to grow only 1.7 per cent this year, down 0.3 percentage points from its forecast in April. In contrast, the eurozone is expected to outperform the UK this year, growing 1.9 per cent, the IMF said. But it cut its forecast for the US to 2.1 per cent for this year and next. The IMF upgraded its forecasts for the growth of the world economy to 3.5 per cent this year and 3.6 per cent in 2018, both up from 3.2 per cent last year.

Reuters: Inflation hits UK public finances in June, adding to Hammond's headache Britain's budget deficit came in wider than expected in June as higher inflation since the Brexit vote forced the government to pay more interest on its debt, driving home the challenge facing Chancellor Philip Hammond. The deficit in June stood at 6.854 billion pounds, up 43 percent compared with the same month last year, the Office for National Statistics said on Friday, citing figures that exclude state-controlled banks. The shortfall for June was much bigger than a median forecast of 4.8 billion pounds in a Reuters poll of economists. In the first three months of the financial year, the budget deficit widened by 8.9 percent compared with the same period in 2016 to 22.8 billion pounds, the ONS said.

News in Brief - 21/07/2017

GBP

Sterling weakened yesterday, but did see a minor rally against USD after news emerged of further political and legal turmoil for the Trump Presidency. June’s Retail Sales report showed an encouraging 0.6% expansion in retail sales, allaying concerns about a collapse in consumer spending, the most important element in the UK economy. However, the data was of little comfort for sterling, which, after an initial rally, sold off after the release, only managing to regain ground in the afternoon against USD. Sterling’s performance against the euro was another story entirely, with GBPEUR seeing fresh lows this morning. News headlines about Theresa May’s Cabinet accepting that the UK will continue to enjoy free movement with the EU during a transitional period has had little currency impact, and at 09:30 BST public sector borrowing figures will be released.

EUR

Nothing seems to be able to stand in the way of the euro this week, and yesterday not even Mario Draghi’s best efforts could prevent further appreciation in the single currency. Although the European Central Bank kept rates unchanged and Draghi included plenty of his usual dovish rhetoric about accommodative policy remaining necessary for some time into the future, he did say that the ECB’s Governing Council would reassess the appropriateness of quantitative easing in Autumn. Yesterday’s presser may be remembered as the day the famed 'Draghi Effect' finally broke down. In the initial years of his ECB Presidency, Mario Draghi had an uncanny ability to immediately have his way with currency and fixed income markets, with his oft-referenced statement that the ECB were willing to do “whatever it takes” to save the euro having already been indelibly inscribed in history. Instead, markets are now looking through Draghi’s statements and instead trading the euro based on the likely path of ECB policy, which is, despite Draghi’s lack of hawkish rhetoric, nonetheless towards less accommodation, and eventually, higher rates.

USD

The greenback’s miseries were compounded yesterday as news broke that special counsel Robert Mueller’s investigation into links between the Trump Campaign and Russia would be expanded to include Trump’s business dealings. Regardless of the eventual outcome of the investigation, for now the net effect on USD has been negative. An ever expanding and deepening crisis engulfing the executive branch is hardly helpful for a currency already hampered by mediocre data and legislative farce. Weekly Unemployment claims were once again exceptionally low yesterday, with just 233,000 new jobless claims, while the Philly Fed Manufacturing Index fell sharply, reflecting slower output growth among the surveyed businesses. No headline US data will be released today, but with reports emerging of the Trump administration seeking to hamper Mueller’s investigation or pardon those found guilty of wrongdoing it seems the week’s political stories are far from over.

UK News- 21/07/2017

FT: May promises business leaders no Brexit ‘cliff edge’ for companies PM tells first meeting of Number 10 business council she is aiming for transition deal. Theresa May has promised business leaders that she will not let companies fall over a Brexit “cliff edge” amid warnings that the City of London could haemorrhage jobs unless she delivers clarity on her exit strategy soon. Mrs May told the first meeting of a new Downing Street business council that she aimed to negotiate a transition deal — or what she calls an “implementation phase” — to smooth the exit process after Britain formally leaves the EU in March 2019. Officials close to the Brexit negotiations say Mrs May will accept an extension of free movement, and that EU citizens should be able to work freely in Britain for a two-year period after exit in March 2019, provided they register with the authorities.

Reuters: Sunshine lifts UK retail sales, points to brighter growth Sunny weather brought British shoppers out and led to stronger retail sales than expected in June, shaking off a gloomy start to the year and suggesting the broader economy may be regaining speed after an early 2017 lull. More recent data have been mixed, as consumers feel squeezed by higher inflation largely driven by sterling's fall after last year's Brexit vote, while the Bank of England has been see-sawing over whether interest rates need to rise. Retail sales volumes rose by 0.6 percent month-on-month in June after falling 1.1 percent in May, the Office for National Statistics said on Thursday, beating economists' forecasts in a Reuters poll for a 0.4 percent rise.

News in Brief - 20/07/2017

GBP

Sterling traded flat against USD and EUR yesterday, as markets entered somewhat of a lull ahead of today’s European Central Bank meeting. However, the pound has started this morning positively, being boosted by an above-forecast June Retail Sales report from the Office of National Statistics. After Tuesday’s Inflation figures came in under expectations, the 0.6% rise is welcome news for an economy that has endured a string of disappointing readings recently. Despite this, monthly Retail Sales figures have been volatile recently, at first expanding rapidly in April due to the timing of Easter, before collapsing in May, making it difficult to judge the overall trend in the series.

EUR

The euro pared back its gains versus USD slightly yesterday, but the move may be rendered meaningless by today’s European Central Bank press conference. Mario Draghi faces the difficult task of acknowledging improving economic conditions and diminished risks in the eurozone, while not sounding so optimistic that he triggers undue euro strength driven by expectations of monetary policy normalisation. May’s slowdown in eurozone inflation will make the job slightly easier, especially given that the spike seen in March. However, the ECB President will be forced to answer some difficult questions around if the overall recent improvement in economic conditions was prompting the Governing Council to discuss an eventual exit – an acknowledgement that may end up being euro positive even if Draghi makes his usual assurances about the outlook for policy remaining dovish. The ECB’s policy decision will be released at 12:45 BST, followed by the presser at 13:30.

USD

The dollar continues to creep higher after the dollar index DXY reached a 10-month low on Tuesday, and is gaining against all G10 currencies. Both building permits and housing starts data bounced back yesterday from two months of contractions. Today is a slow day in the US in terms of fundamental data, and with all eyes focused on the ECB meeting today, the dollar could remain out of the spotlight. The only important release is the Philly Fed manufacturing index at 13.30 BST.

UK News- 20/07/2017

FT: Eurozone current account surplus shrinks in May The eurozone’s current account surplus with the rest of the world shrank again in May on the back of a declining goods balance and falling income on foreign assets. The 12-month current account – a measure of the bloc’s external balance in financial flows and trade – shrank from 3.2 per cent of GDP to 3.5 per cent in May, according to the ECB. In seasonally adjusted terms, the surplus was up from €23.5bn to €30.1bn. The eurozone has swung dramatically into a current account surplus since its debt crisis struck in 2012. The balance has been driven largely by Germany, whose surplus hit a record of 8.6 per cent of GDP in 2016.

Reuters: Pace of British construction activity slows as Brexit delays investment The pace of growth in Britain's construction industry slowed over the second quarter as investment was delayed by uncertainty over Brexit and the general election, a leading property body reported on Thursday. The quarterly survey from the Royal Institution of Chartered Surveyors showed a reversal from the first quarter, which saw growth accelerate at its strongest pace since the June 23, 2016 referendum on leaving the European Union. A net balance of 21 percent respondents reported an increase in total workload in the second quarter, down from 27 percent recorded in the previous quarter, RICS said. The private commercial and industrial segments felt the sharpest slowdown.

News in Brief - 19/07/2017

GBP

Sterling weakened significantly yesterday after inflation data for June fell well short of expectations, taking the pressure off the Bank of England to hike interest rates in the near future. Year on Year Consumer Price Index inflation eased to 2.6%, down from 2.9% previously, and in line with the Bank of England’s last Inflation Report, which forecast inflation to peak at around 3%. This is a view that remains intact after yesterday’s data, although a marginal overshoot this year still remains possible. The figures strengthen the argument for those within then Monetary Policy Committee who argued that the Bank should be “looking through” the current inflationary shock. No headline sterling data will be released today, meaning attention will remain firmly focussed on tomorrow’s crucial Retail Sales release.

EUR

The euro is selling off slightly this morning, having reached highs against a number of currencies including a 14 month high against USD yesterday. Anticipation is building for tomorrow’s European Central Bank meeting, when President Mario Draghi will once again be pressed hard by media on whether the ECB has begun to contemplate tapering asset purchases. Rumours are already swirling, with Bloomberg citing unnamed sources who are reportedly “examining scenarios for the future path of quantitative easing”. Yesterday’s data releases included the ZEW Economic Sentiment survey, which showed marginally lower confidence among the surveyed investors in both Germany and the eurozone as a whole.

USD

After selling off heavily yesterday morning, the dollar is beginning to show tentative signs of a rally, or at least stability, and is off lows against a number of currencies including the euro and sterling. In remarks made yesterday, President Donald Trump advocated a novel policy making strategy for the US state-administered and partially funded healthcare system known as Obamacare: doing nothing and allowing it to fail. The development further demonstrates the lack of a headline legislative achievement for Trump and the Republicans, some six months into his presidency. Today at 13:30 BST Building Permits will be released alongside Housing Starts.

UK News- 19/07/2017

FT: ‘Cold feet’: Euro dips from 14-month high ahead of ECB meeting Euro slips from 14-month high as attention turns to ECB. The euro has slipped back from its highest level since May 2016 this morning as investors eye the European Central Bank’s last major policy decision before the summer lull tomorrow. Anticipation ahead of the governing council meeting has been building after ECB president Mario Draghi rattled bonds and drove the euro higher with bullish remarks on the state of the eurozone recovery at the end of June. Although the ECB’s communications since the Sintra speech have sought to play down prospects of a tapering, German Bund yields have more than doubled in the last three weeks, and are at 0.556 per cent this morning. (Yields rise when prices fall.)

Reuters: UK inflation surprises with slowdown, easing pressure on Bank of England British inflation unexpectedly slowed last month for the first time since October, dousing expectations among investors that the Bank of England might soon raise interest rates for the first time in a decade. Consumer prices rose by 2.6 percent compared with a year earlier, the Office for National Statistics said, down from a nearly four-year high of 2.9 percent in May. Economists had expected the rate to remain unchanged and some of them trimmed their forecasts for price growth to just below 3 percent in 2017 as a whole after Tuesday's figures. But BoE Governor Mark Carney said the "big picture" for inflation remained the same and the main driver was still the fall in sterling since last year's Brexit vote.

News in Brief - 17/07/2017

GBP

Sterling made significant inroads against the US dollar on Friday, soaring to a fresh high for the year amid unexpectedly poor US data. Brexit talks resume in Brussels today, with Philip Hammond calling for a transitional arrangement to soften whatever blow is coming to externally focussed businesses. Further sterling relevant headlines seem likely this week, especially given that the Government has been making conciliatory noises on the issue of a divorce payment to the European Union. This week’s major release will be Consumer Price data tomorrow, which could well see the headline CPI rise above 3%. Later in the week, Retail Sales will be released on Thursday.

EUR

The euro did also surge against USD on Friday, but stopped short of the highs seen earlier in the month, further suggesting that the single currency’s long rally is finally beginning to find some resistance. This week’s European Central Bank rate announcement and press conference on Thursday represent a pivotal event for the euro; much of its strength over the past 6 months has been built on rising expectations of an eventual end to quantitative easing from the ECB. If Thursday’s presser reveals that the Governing Council has finally begun to even discuss the prospect of monetary normalisation, the euro will quickly be eyeing post-QE highs against USD and several other currencies. Today at 10:00 BST the latest Consumer Price Index data will be released.

USD

Friday’s poor data acted as something of a coup de grace for the US dollar, which plummeted to fresh lows for the year against many currencies including GBP and AUD, as well as on a weighted basis. Retail Sales and the Consumer Price Index were both released well short of expectations, with headline CPI flat on the month and retail sales falling 0.2%. Neither of the releases suggest the US economy is overheating even remotely, and, if continued in next month’s data, may even prompt a rethink of the necessity of further rate hikes this year. This will be a quiet week for the US dollar, with no data releases as important as last week’s. The Empire State Manufacturing Index will be released today at 13:30 BST, followed by Building Permits and Housing Starts on Wednesday.

UK News- 17/07/2017

FT: Business ‘confused and dismayed’ at government over Brexit Warming relations reveal gaps in planning and confusion over myriad working groups. An attempt to woo British business leaders by the government has left them confused over who to speak to and dismayed at the lack of preparation as Brexit negotiations restart on Monday. An initially frosty relationship between the government and businesses has warmed since the June election, with Theresa May’s administration now keen to receive input from businesses over Brexit. More than 30 executives and lobbyists met David Davis, Brexit secretary, and other ministers at the official government residence at Chevening in Kent this month, while the Federation of Small Businesses hosted Margot James, their relevant minister, and Robin Walker, a Brexit minister, in London last week.

Reuters: UK budget watchdog warns of long-term Brexit risk for public finances Britain will need to curb public spending further or raise taxes if leaving the European Union does long-term damage to economic growth, underscoring the importance of the country striking new trade deals, the government's budget watchdog said on Thursday. The Office for Budget Responsibility said ensuring robust trade agreements was more significant for the long-run health of Britain's public finances than the size of any "divorce bill" to settle one-off liabilities with the EU. "While some numbers mooted for it are very large, a one-off hit of this sort would not pose a big threat to fiscal sustainability. More important are the implications of whatever agreements are reached with the EU ... for the long-term growth of the UK economy," the OBR said. Just a 0.1 percentage-point fall in the annual growth rate of the economy and tax revenues would cause Britain's debt-to-GDP ratio to be 50 percentage points higher after 50 years, if public spending plans remained unchanged, the public body added.

News in Brief - 14/07/2017

GBP

Sterling had another eventful day yesterday, rallying against both EUR and USD after senior Bank of England Monetary Policy Committee member Ian McCafferty said that he believed the Bank should exit its quantitative easing programme earlier than current consensus would seem to indicate. McCafferty voted to raise interest rates in June and is known for his hawkish leanings on interest rates, and could well continue to find little traction for his views among the MPC as a whole. Elsewhere, Bank of England credit conditions data showed that lenders were reducing credit availability among a surge in defaults – hardly frothy financial conditions that require immediate monetary tightening. Finally, the Government acknowledged for the first time yesterday that a financial settlement – or divorce payment – will be necessary as part of Brexit negotiations, suggesting that Boris Johnson’s suggestion that EU leaders be told to “go whistle” has not yet made it into official policy.

EUR

The euro weakened yesterday, even against the US dollar which was coming under broad pressure elsewhere. German and French Consumer Price Index revisions were released for June, although both monthly changes remained the same as the previous release, at 0.2% and 0.0% month on month change respectively. Today is National Day – or Bastille Day – in France, and banks will close, but at 10:00 BST Italian and Eurozone Trade Balance data will be released.

USD

When viewed on a broad or weighted basis USD struggled in many places yesterday including against sterling, but did manage to regain some ground against the euro. Producer price index data showed that headline producer prices had expanded by 0.1%, driven by higher food prices, although once volatile items such as food were excluded the index was up only 2% compared to June 2016. Weekly Unemployment Claims were low, but nonetheless slightly higher than expected. Janet Yellen testified again, this time to lawmakers from the Senate, and mostly stuck to the message she has honed over recent months, and at testimony to the House earlier this week. Interest rate hikes would be gradual, and conditional on incoming data, particularly around inflation and wages. Given the central importance of data to the Fed’s approach to further tightening, today’s US releases will certainly be worth watching, with Retail Sales and the Consumer Price Index out at 13:30 BST, followed by Industrial Production at 14:15.

UK News- 14/07/2017

FT: Britain concedes it will have to pay EU exit bill First explicit acknowledgment of liabilities likely to avert Brexit talks clash. Britain has for the first time explicitly acknowledged it has financial obligations to the EU after Brexit, a move that is likely to avert a full-scale clash over the exit bill in talks next week. In a written statement to parliament touching on a “financial settlement”, the government recognised on Thursday “that the UK has obligations to the EU?.?.?.?that will survive the UK’s withdrawal — and that these need to be resolved”. The text, released by Joyce Anelay, a Brexit minister, was immediately seen by Brussels as a potentially important development. EU diplomats say the wording “goes further” than Theresa May’s previous reference to Britain being willing to reach a “fair settlement” of unspecified obligations.

Reuters: British tourism boosted by 21 percent jump in foreign holidaymakers The number of foreign holidaymakers coming to Britain in the first three months of this year jumped by 21 percent, adding to other signs that the fall in the value of the pound since last year's Brexit vote is helping the country's tourism industry. The overall number of foreign visitors to Britain rose by 9.9 percent compared with a year earlier, including a nearly 2 percent fall in business travellers, the Office for National Statistics said on Thursday. Trips abroad by British holidaymakers rose by 5.6 percent, contributing to an overall 8.1 percent increase in UK residents going out of the country in the January-March period.

News in Brief - 13/07/2017

GBP

Firm labour market data in the UK and general dollar weakness helped drive a rebound in GBPUSD yesterday, recuperating 1%. The July Labour Market Report from the Office for National Statistics showed that Unemployment had fallen once again, to just 4.5%, the lowest level since 1975. For those inclined to criticise Unemployment as being too narrow a measure of joblessness, the total employment rate had risen to the highest level since comparable records began in 1971. However, wage growth slowed to 1.8% year on year, leaving real wages, or wages adjusted for the effects of inflation, down by 0.7%. As a result, the report had something for the sterling bears and bulls alike – the UK labour market remains in good shape, but real wages are contracting and are likely to put further pressure on consumer spending and confidence. Today at 09:30 the Bank of England’s latest Credit Conditions Survey will be released.

EUR

The euro was one of the few G10 currencies that did not strengthen against the US dollar yesterday, perhaps indicating that the single currency’s long rally against USD is finally showing signs of old age, or at least some profit taking. Little headline euro data was released yesterday, apart from monthly Industrial Production, which expanded a solid 1.3% in May, and German Wholesale Prices, which changed 0.0% in June. Final German and French Consumer Price Index figures were released this morning, showing 0.2% and 0.0% changes on the month respectively.

USD

USD was down against most the G10 and emerging markets yesterday, with euro being the notable exception. Janet Yellen’s testimony to Congressional lawmakers contained few surprises: further rate hikes would be gradual and limited, conditional on improvement in the economy. The Federal Reserve Chair also said that the process of shrinking the Fed’s massive balance sheet would not be used as a policy tightening tool, implying a very gradual pace of cessation of asset reinvestment. Yellen did, however, sound a tad cautious about the outlook for inflation, which has slowed recently. A further slowdown would likely trigger delays in the Fed’s next rate hike, which is currently likely to come sometime this year. Today at 13:30 BST, the latest Producer Price Index data will be released, alongside weekly Unemployment Claims. Yellen will go another round with lawmakers, this time from the Senate, at 15:00.

UK News- 13/07/2017

Reuters: UK election jitters push house price rises to 11-month low - RICS British house price inflation slowed last month to its weakest since just after last year's Brexit vote, but this time domestic political worries played the greatest role, a property industry body said on Thursday. The Royal Institution of Chartered Surveyors (RICS) said its monthly house price index dropped to +7 in June from +17 in May, its lowest since July last year and below all forecasts in a Reuters poll of economists. "The term 'uncertainty' is featuring more heavily in the feedback we are receiving," RICS chief economist Simon Rubinsohn said. "This seems to be exerting itself on transaction levels, which are flatlining and may continue to do so."

FT: MPs plot to water down Theresa May’s Brexit bills Pro-Europeans seek to amend legislation so the UK makes a softer exit from EU. Prime minister Theresa May will on Thursday publish the government’s flagship piece of Brexit legislation, marking the start of a parliamentary war of attrition over the form of the UK’s departure from the EU and posing a major test of her authority. The repeal bill to transpose EU law on to the UK statute book will be the first of eight Brexit bills Mrs May hopes to get enacted, all of which could face amendment by MPs and peers who want to push Britain towards a “softer” exit from the bloc. With a working Commons majority of just 12 following the Conservatives’ poor performance in last month’s general election, Mrs May could face weekly challenges by pro-Europeans against her hard Brexit plans, knowing that any moves to water them down risk provoking rebellions by Tory Eurosceptics.

News in Brief - 12/07/2017

GBP

Volatility on FX majors remained low yesterday, although sterling did continue to edge lower against USD. Much anticipated speeches from Ben Broadbent and Andy Haldane passed without incident, with Broadbent steering deliberately clear of monetary policy issues. The Conference Board’s Leading Index, a composite of forward looking economic indicators, read -0.1% for May, slightly less contractionary than before. UK fundamental data has been patchy recently, and so today’s release of labour market data at 09:30 BST, especially the Unemployment Rate and the Average Earnings Index, will be crucial. Average Earnings growth has been trending downwards this year, and a further fall in this month’s data is expected by most forecasters, a development that is likely to pour cold water on the Bank of England’s recent hawkish turn.

EUR

The euro saw another decisive break higher against USD yesterday, with a number of potential explanations including comments from European Central Bank policy maker Benoit Coeure, and US political turmoil. Yesterday’s sole data release of note was Italian Industrial Production, which expanded 0.7% in May after a 0.5% fall previously. This morning’s data has included a 0.0% change in the German Wholesale Price Index. At 10:00 BST, eurozone Industrial Production figures will be released.

USD

The dollar has yet again come under major pressure in the last 24 hours, taking a particularly significant beating against the euro. Ongoing political turmoil around links between the Trump administration and Presidential campaign and the Russian government remained in the headlines yesterday. The focus this time is on Trump’s son, Trump Jr, admitting to seeking so-called kompromat- compromising material- on Hillary Clinton from a lawyer allegedly linked to the Russian government. Today’s testimony to House lawmakers by Federal Reserve Chair Janet Yellen has the potential to overshadow this latest controversy. The Fed has given no indication yet that soft wage growth and the recent fall in inflation will dissuade it from hiking further, but Yellen is likely to come under intense scrutiny today and it’s possible she will provide material new information. The testimony will begin at 15:00 BST.

UK News- 12/07/2017

FT: Trump Jr welcomed offer of Russian help to damage Clinton ‘I love it’, son responded when told Moscow lawyer had detrimental material on rival. Donald Trump Jr, the son of the US president, enthusiastically welcomed an offer of information aimed at hurting Hillary Clinton’s presidential campaign that was purportedly provided by a top Russian government official, according to an email exchange that he released on Tuesday. According to the emails, Robert Goldstone, a music industry PR executive, told the president’s son in June 2016 that two Russian businessmen were willing to share “incriminating” information about Mrs Clinton that they claimed to have received from the top prosecutor in Russia.

Reuters: Bank of England's Broadbent silent on rates, sends pound sliding Bank of England Deputy Governor Ben Broadbent kept mum on his views about interest rates on Tuesday, prompting financial markets to assume he sees no pressing need to change. Broadbent's speech in Aberdeen to the Scottish Council for Development and Industry had been keenly watched as a chance to hear the views of a rate-setter who has not commented publicly since the Monetary Policy Committee came unexpectedly close to raising interest rates for the first time in a decade last month. But Tuesday's comments shed little light. Instead, he spoke on how a reduction in trade between Britain and the European Union would harm both economies and causes prices to rise.

News in Brief - 11/07/2017

GBP

Very little volatility in the pound yesterday in the absence of any headline data, and despite a number of political developments. Most prominently, we saw the rejection of UK Prime Minister Theresa May’s initial offer on European Union citizen’s rights by senior Members of European Parliament including Guy Verhofstadt, the senior co-ordinator for Brexit. Elsewhere on Monday, Theresa May’s spokesperson said that the European Court of Justice could retain jurisdiction over elements of British law during a transition period for Brexit, in an apparent concession to a likely European demand in negotiations. This morning’s data has included a strong print for the British Retail Consortium’s Retail Sales Monitor, which rose 1.2% year on year. The index tracks same store sales value, and suggested that warm weather and higher food prices may caused a pickup in retail sales in June. Today at 11:00 BST the Monetary Policy Committee’s Andy Haldane will speak, followed at 12:00 by his colleague Ben Broadbent.

EUR

The euro took a marginal hit against USD yesterday, despite a firm print for the Sentix Investor Confidence Index, which remained at a high level for the July edition of the survey. Today at 09:00 BST Italian Industrial Production figures will be released, amid a sparse day for the euro data calendar.

USD

USD is trading slightly up this morning compared to yesterday’s open, after a relatively uneventful day yesterday. Political developments remain front and centre for the United States this week, as Republican lawmakers grapple with passing controversial healthcare legislation that has been assessed as leaving millions without access to healthcare. The subtext of the current legislative battle is the prospect of tax reform – if the Republicans can’t pass their long-promised replacement for Obamacare, the prospect of substantial tax reform seems distant. Today at 11:00 BST the NFIB Small Business Index will be released, followed at 15:00 by the Job Opening and Labour Turnover Summary, an increasingly important measure of how tight the labour market is growing. At 17:30 influential Federal Reserve policy maker Lael Brainard will speak in New York, on the potentially incendiary topic of balance sheet normalisation.

UK News- 11/07/2017

FT: Trump Jr was told of Russian plot to boost father’s campaign Email said damaging material on Clinton was part of Kremlin effort to sway election. Donald Trump Jr met a Russian lawyer last year expecting to receive damaging information about Hillary Clinton after being told in an email that the material was part of Moscow’s efforts to boost his father’s presidential bid. As Donald Trump was closing in on the Republican party’s nomination, the candidate’s son received the email from Robert Goldstone, a public relations executive and former British tabloid journalist, according to Alan Futerfas, a New York lawyer representing Mr Trump Jr.

Reuters: UK shoppers spend more on essentials as inflation rises British households spent more money on food and other essentials last month but held back on less urgent purchases as they faced rising prices, two sets of industry figures showed on Tuesday. The data is likely to add to concerns that consumer demand has slowed further after a weak first quarter, as the effect of the fall in the pound after last year's vote to leave the European Union increasingly makes itself felt. Payments company Barclaycard said year-on-year consumer spending growth slowed to a 15-month low of 2.5 percent in June from 2.8 percent in May, as spending on household goods and entertainment slowed. The British Retail Consortium said its measure of retail spending growth rose to 2.0 percent last month from 0.2 percent in May, above its average of 1.4 percent in the past six months.

News in Brief - 07/07/2017

GBP

The action was in fixed income and equities yesterday, which both sold off while sterling found some space to rally slightly vs USD. The pound did remain under pressure against the euro however. There were no headline data releases of note, but today’s calendar is considerably more lively. Halifax’s House Price Index will be released at 08:30 BST, followed by Industrial Production figures at 09:30, which will be accompanied by Construction Output and the Goods Trade Balance. A significant rebound is expected in Construction Activity after last month’s 1.6% drop, meaning the stakes for sterling in the event of another contraction seem rather high. The National Institute of Economic and Social Research’s estimate of Gross Domestic Product growth will be released at 13:00.

EUR

Another major wave of euro strength swept G10 currency markets yesterday, as the single currency erased its losses against the dollar and made inroads against sterling as well. Minutes from the European Central Bank’s latest meeting made clear what President Mario Draghi seems to have been reluctantly acknowledging: the improved economic circumstances in the eurozone are indeed sparking conversation among senior ECB decision makers about at least changing the Bank’s dovish forward guidance. This morning’s data has included a decent print for German Industrial Production, which expanded by 1.2% in May, double last month’s rate. News emerged from the ongoing G20 conference that EU leaders were prepared to retaliate if the Trump administration implemented plans to limit steel imports, hardly a surprising development given the EU’s long history of muscular trade policy. Trump’s measures are targeted at China, where steel producers have, arguably, enjoyed inappropriate levels of state support, but the potential European reaction highlights the possibility of unintended consequences.

USD

USD sold off yesterday as fixed income instruments sold off globally alongside equities, as markets began to price in the possibility of a wave of global monetary policy normalization. Yesterday’s data was mixed. ADP’s estimate of Non-Farm Payroll job creation was 158,000, significantly below the series’ medium term trend, although not altogether unexpected given tight labour market conditions. Services Purchasing Managers Indices from both ISM and Markit showed a greater level of reported activity growth. Today at 13:30 BST monthly Non-Farm Payrolls will be released, alongside Average Hourly Earnings. At this stage, wage growth is probably the more important measure as with Unemployment at 4.3% it’s unclear if the economy is capable of regularly creating 200,000 + jobs. The Federal Reserve’s Monetary Policy Report will also be released at 16:00, setting the stage for Fed Chair Janet Yellen’s testimony to lawmakers next week.

UK News- 07/07/2017

REUTERS: UK starting salaries jump as Brexit vote hits staff supply - REC. LONDON Salaries for British workers starting in permanent jobs rose at the fastest pace since 2015 as businesses found it harder to hire staff, a problem exacerbated by Brexit, a survey of recruitment firms showed on Friday.

GUARDIAN: Half of junior doctors having accidents or near misses after night shifts. More than half of trainee hospital doctors have had an accident or near miss on their way home after a night shift due to sleep deprivation, according to new evidence about fatigue among NHS staff.

DAILY MAIL: Labour take shock poll lead over Conservatives as ministers plot to oust 'three-legged horse' Theresa May in coup launched by series of autumn resignations. Labour have taken a shock poll lead over the Tories as ministers plot to oust Theresa May with a coup launched by a series of resignations in autumn. The first YouGov survey since the General Election last month puts Jeremy Corbyn's party eight points ahead.

News in Brief - 06/07/2017

GBP

Worrying signs continued to emerge about the state of the economy yesterday, but sterling held up well and even managed to eke out marginal gains versus USD and EUR. The Services Purchasing Managers’ Index was 53.4 versus 53.8 previously and a median forecast of 53.5, a small miss that should be viewed in the context of this week’s other releases. Manufacturing and Construction PMIs also fell short of expectations earlier in the week, while Car Registration figures showed a 4.8% year on year drop in June. Vehicles are a big ticket purchase that consumers are likely to delay if their confidence in future incomes is low, and as such are a major leading factor for future consumer spending. We’ve already seen a significant slowdown in consumer spending in the UK, and the fall in vehicle sales suggests we may not yet be done. Today at 09:30 BST the Bank of England will release Housing Equity Withdrawal Statistics.

EUR

The euro’s rally from last week and before appears to be running out of steam, and yesterday’s crop of good data prints did little to buoy the single currency further. European Purchasing Managers Indices for the services sector showed a strong level of reported growth across the continent, while Retail Sales grew 0.4% in May. German Factory Orders bounced back by 1.0% after a 2.2% decline previously, according to data releases this morning. At 09:10 BST Retail Purchasing Managers Index data will be released.

USD

Although USD did close yesterday up on a broad basis, the release of the Federal Reserve’s latest meeting minutes did not provide a significant boost for the greenback despite being relatively hawkish. The minutes revealed that the rate-setting Federal Open Market Committee was nearing consensus about the necessity of reducing the Federal Reserve’s huge balance sheet, which has been inflated to historic highs by the asset purchasing programme known as quantitative easing. However there does seem to be division over how early and how steep the normalisation process should be, in light of the persistently low inflation that is dogging not only the United States but the developed world in general. The next few months of data are therefore crucial. If wages or inflation pick up again, the Fed is likely to keep faith in traditional economic models that suggest strongly an economy with very low unemployment and some modicum of growth will eventually produce the wage inflation that will drive consumer prices upwards, and tighten accordingly. Today at 13:15 BST the ADP estimate of Non-Farm Payrolls will be released, followed at 13:30 by weekly unemployment claims. Services Purchasing Managers Indices will be released by ISM and Markit at 14:45 and 15:00 respectively.

UK News- 06/07/2017

GUARDIAN: Family of four needs 'at least' £40,800 a year, says thinktank. Rising inflation and less generous state benefits have made it harder over the past year for families on tight budgets to enjoy what the public considers a decent standard of living, according to one of Britain’s leading thinktanks. The Joseph Rowntree Foundation (JRF) said that despite an above-inflation increase in the “national living wage”, low-income families were falling further behind a minimum income standard.

TELEGRAPH: Sir John Chilcot accuses Tony Blair of not being 'straight with the nation' over Iraq War. The chairman of the public inquiry into the 2003 conflict said the former prime minister had been "emotionally truthful" in his account of events leading up to the war.

DAILY MAIL: Millions of commuters facing 4% rise in rail fares because figure used to set annual increases in January is taken in the previous July Millions of commuters face the biggest hike in rail fares for five years as the cost of living rises. The increase is expected to be almost four per cent, adding hundreds of pounds to the cost of many season tickets.

News in Brief - 04/07/2017

GBP

Sterling weakened significantly versus USD yesterday, as the greenback finally showed signs of life, and political back and forth continued over public sector pay. This morning sees the choppy trading in sterling continue, as two Bank of England rate-setting members gave opposing views on the outlook for monetary policy in the UK. In an interview with a North Wales newspaper, Ian McCafferty said that in his view rate hikes would be “prudent” in the near future. McCafferty is a known hawk and has already voted for raising interest rates, so the statements are hardly a surprise. Conversely Gertjan Vlieghe, a dovish member of the Bank of England’s Monetary Policy Committee, told The Independent that “this is an environment where a premature hike would be a bigger mistake than one that turns out to be slightly late”. Aside from this, Markit’s Manufacturing Purchasing Managers Index was released yesterday, and fell to 54.3 in June, significantly below expectations. The result indicates growth in the sector, as reported by the surveyed manufacturers, slowed at the end of the second quarter despite strong external demand due to sterling depreciation. Today at 09:30 BST, the equivalent Construction PMI will be released.

EUR

The euro also headed lower against USD yesterday, although the raft of manufacturing surveys released were generally positive. In particular, the German and overall European Manufacturing Purchasing Managers Indices surged into the high 50s, indicating rapid growth in the sector. This morning’s data has included a smaller than expected drop in Spanish Unemployment, which fell by 98,300, bringing Unemployment to its lowest level in 8 years. At 10:00 BST the Producer Price Index will be released.

USD

After weeks of either trading sideways or selling off, the US dollar started this week with gains versus the entire G10, only paring back its gains slightly overnight. Yesterday’s data included a strong print on the ISM Manufactuinr Purchasing Managers’ Index, which rose to 57.8, a high reading, although the equivalent Markit Manufacturing PMI was less optimistic. Total Vehicle Sales were slightly soft, falling to 16.5m in June. Market nervousness regarding the ongoing political tensions with North Korea also helped risk assets such as the dollar, with the announcement that the rogue nation had successfully launched yet another missile, reportedly falling in to Japanese waters. The US celebrates the Fourth of July holiday, and most businesses will close.

UK News- 04/07/2017

Reuters: UK factories lose pace as exports slow despite weaker pound British factories grew more slowly than expected in June as export orders rose at the weakest pace in five months, according to a survey on Monday that might disappoint Bank of England officials who favour raising interest rates. Sterling, which jumped last week on expectations of a BoE shift towards higher borrowing costs, fell after the Markit/CIPS UK Manufacturing Purchasing Managers' Index(PMI) slipped to 54.3 from a downwardly revised 56.3 in May, a three-month low.

FT: North Korea claims first long-range missile launch Trump calls on China to ‘put a heavy move’ on Pyongyang to ‘end this nonsense’. North Korea has risked provoking a confrontation with the US after it claimed a rocket it fired on Tuesday was its first intercontinental ballistic missile launch. The test firing off the country’s east coast saw the missile fly for 40 minutes and reach an altitude of more than 2,500km, characteristics that led analysts to give the North Korean claim some credibility. They said such a long-range missile could reach Alaska.

News in Brief - 03/07/2017

GBP

After several weeks of low volatility, G10 currencies were on the move last week as markets readjusted assumptions about central bank policy, allowing sterling to strengthen against the beleaguered US dollar. This morning at 09:30 BST monthly Manufacturing Purchasing Managers Index data will be released, and is likely to show a strong level of activity in the sector. At 18:30 Bank of England Chief Economist Andy Haldane will speak, after giving incendiary speech last month saying he is was warming up to the idea of rate hikes. Later in the week PMI surveys for Construction and Services will be released on Wednesday and Thursday, and “hard” data in the form of Industrial Output will be released on Friday.

EUR

The euro was another major benefactor of last week’s turmoil in bond markets, and appreciated significantly against USD, have been trapped in a tight range for the preceding weeks. Friday’s data included revised eurozone inflation for June, which showed the Core Consumer Price Index up 1.1%, compared to 0.9% previously. This will be a busy week for the euro data calendar, with rafts of mid-tier data released today and on Wednesday. Today’s releases have included European Manufacturing Purchasing Managers’ Indices, where the region's overall indicator was in line with expectations. Eurozone Unemployment will be released at 10:00 BST.

USD

USD was solidly on the back foot last week, as markets revised expectations of global interest rates upwards, leaving the greenback behind in relative terms. Friday’s biggest release was the Core Personal Consumption Expenditures Price Index, the Federal Reserve’s favoured measure of inflation. Year on year growth in the index slowed to 1.4% from 1.5% previously, in line with expectations. Today at 14:45 BST and 15:00 Manufacturing Purchasing Managers Indices will be released by Markit and ISM respectively, the latter accompanied by Construction Spending. Later in the week, the Federal Reserve’s latest meeting minutes will be out on Wednesday, followed by monthly non-farm payrolls on Friday.

UK News- 03/07/2017

FT: Investment in UK car industry plummets amid Brexit uncertainty Total investment on track to be less than half of the spending recorded last year. Investment in the UK car industry has fallen to just £322m in the first half of 2017, in a sign that companies are delaying or cancelling spending ahead of the UK leaving the EU. Last year £1.66bn was invested in the auto sector, more than 30 per cent down from £2.5bn in 2015, as carmakers and their suppliers delayed non-essential investment following the EU referendum last June. But investment looks to have fallen even further in the first six months of this year, according to figures compiled by the Society of Motor Manufacturers and Traders industry body.

Reuters: Euro zone factories round off first half of 2017 on six-year high - PMI Factories across the euro zone rounded off the first half of 2017 by ramping up activity at the fastest rate for over six years as rising prices failed to put a dent in orders, a survey showed on Monday. IHS Markit's Manufacturing Purchasing Managers' Index for the euro zone rose to 57.4 in June, up from May's 57.0 and pipping the preliminary reading of 57.3. June's reading was the highest since April 2011 and was comfortably above the 50 level that separates growth from contraction.
 
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