Looking at the day ahead, it's a busy day for the Pound, with a heavy economic calendar to provide direction. Geopolitics will also remain in focus.
It was a relatively busy Asian session on the economic calendar this morning.
Economic data through the session included 2nd quarter GDP numbers out of Japan and July inflation figures out of China.
Outside of the numbers, RBA Governor Lowe spoke before the House of Representatives’ Standing Committee on Economics ahead of the RBA’s release of its Monetary Policy Statement.
According to figures released by Japan’s cabinet office, the economy grew by 1.8% in the 2nd quarter, year-on-year, which was better than a forecasted 0.4% rise. The economy had grown by 2.2% in the 1st quarter. Quarter-on-quarter, the economy grew by 0.4%, slowing from 0.6% in the 1st. Economists had forecast the economy to grow by just 0.1%.
The Japanese Yen moved from ¥105.842 to ¥105.921 upon release of the figures. At the time of writing, the Japanese Yen was up by 0.06% to ¥106.01 against the U.S Dollar
The annual rate of inflation picked up from 2.7% to 2.8% in July, coming in ahead of a forecast of 2.7%. Month-on-month, consumer prices rose by 0.4%, reversing a 0.1% decline in June. Economists had forecast consumer prices to hold steady.
Wholesale price inflation disappointed, however, with the Producer Price Index falling by 0.3% in July, partially reversing a 0.6% rise in June.
RBA Governor Lowe continued to toe the line on monetary policy, stating that rates would remain low for an extended period of time.
Please find the link to the transcript from the opening statement. Salient points from the opening statement included:
The Aussie Dollar moved from $0.67952 to $0.68102 through the early part of the statement.
Comparing forecasts from the statement of monetary policy released back in May:
The Aussie Dollar moved from $0.68042 to $0.68059 upon release of the statement, which coincided with the release of China’s inflation figures. At the time of writing, the Aussie Dollar was up by 0.10% to $0.6809.
At the time of writing, the Kiwi Dollar was up by 0.09% to $0.6486.
It’s another relatively quiet day ahead on the economic calendar. Germany’s June trade figures and Italian inflation numbers are due out of the Eurozone.
We would expect the market focus to be on Germany’s trade figures that will likely spell more doom and gloom if stats from the week are anything to go by…
At the time of writing, the EUR was up by 0.14% to $1.1194.
It’s a particularly busy day ahead on the data front. Key stats include GDP, trade, industrial production and manufacturing production numbers.
We expect the GDP and manufacturing production figures to be the key drivers on the data front.
A pickup in service sector activity continued to reflect a resilient UK economy in spite of the rising prospect of a no-deal Brexit.
The GDP numbers could affirm recent chatter, however, that the UK has fallen into a recession. Any contraction would likely weigh heavily on the Pound.
Outside of the stats, the markets will need to monitor any Brexit chatter throughout the day.
At the time of writing, the Pound was up by 0.04% to $1.2138.
It’s another quiet day for the Greenback, with key stats due out of the U.S limited to the wholesale inflation figures for July.
While any uptick in wholesale inflationary pressures would be positive, any upside for the Dollar will likely be limited.
Negative sentiment towards the U.S economy, fueled by the escalation in the U.S – China trade war will likely continue to overshadow the numbers.
On the day, any trade war chatter will be the key driver. U.S President Trump has had a tendency to catch the markets off guard with his tweets late in the week…
At the time of writing, the Dollar Spot Index was down by 0.07% to 97.547.
It’s a busier day ahead on the economic calendar. July employment numbers will provide direction later in the day. Expect the Loonie to be particularly sensitive to any negative numbers.
Of less influence on the day will be July housing start numbers that precede the labor market numbers.
Outside of the stats, market risk sentiment will continue to play a hand on the day.
The Loonie was up by 0.08% at C$1.3216, against the U.S Dollar, at the time of writing.
With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.