UK Stats, the BoC and Powell Put the GBP, Loonie and USD in Focus

Stats out of the UK could hit the Pound, the BoC is due to deliver its policy decision with FED Chair Powell is due to give testimony to Congress.
Bob Mason
Forex Markets Currency Trading Concept.

Earlier in the Day:

It was a relatively busy Asian session this morning, with key stats including Australia’s consumer sentiment figures and inflation numbers out of China.

Outside of the stats, the markets were also looking ahead to FED Chair Powell’s testimony to Congress, which will be considered the main event of the week.

For the Aussie Dollar

The Westpac Consumer Sentiment Index fell by -4.1% to 100.7 in July. The sentiment index had fallen by 0.6% in June. According to the latest Westpac report,

  • The family finances vs a year ago increased by 3% to 85.7. The sub-index continued to remain below the long run average 89.4.
  • In addition, the family finances next 12-months tumbled by 8% to 98.4, with the losses coming in spite of the latest RBA rate cut.
  • Sentiment towards the economic outlook deteriorated in the month.
  • The economic conditions next 12-months sub-index slid by 12.3% to 87.1, falling below the long-run average 90.9. Year-on-year, the sub-index was down by 17.4%.
  • The sub-index for economic conditions next 5-years also saw red, falling by 6.7% to 91.6, holding just above the long-run average 91.3.
  • On the consumer spending front, the time to buy a major household item index increased by 3.6% to 119.7. The index continued to sit well below a long run average 127.3.
  • Weighed by negative sentiment towards the economy near-term, the unemployment expectations index jumped by 5.8% to 134.4, following on from a 5.1% rise in the previous month. The long-run average stood at 130.0 in May.
  • From the housing sector, the time to buy a dwelling sub-index increased by 5.4% to 123.2, with the House Price Expectations Index jumping by 8.9% to 119.4. The index had surged by 22.7% in the previous month.

The Aussie Dollar moved from $0.69263 to $0.69220 upon release of the figures, which preceded inflation numbers out of China.

Out of China

The annual rate of inflation held steady at 2.7% in June, which was in line with forecasts. Month-on-month consumer prices fell by 0.1%, which was also in line with forecasts. Consumer prices had increased by 0.1% in May.

In spite of the annual rate of inflation holding steady, the annual rate of wholesale inflation stalled in June, falling short of a forecasted 0.3% rise. The producer price index had increased by 0.6% in May.

The Aussie Dollar moved from $0.69229 to $0.69243 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.12% to $0.6920.

Elsewhere

At the time of writing, the Kiwi Dollar was down by 0.2% to $0.6593, while the Japanese Yen was down by 0.06% to ¥108.91 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s a quiet day ahead on the economic calendar. With no material stats due out of the Eurozone, the focus will be on the Pound, the Loonie and the Greenback.

FED Chair Powell’s testimony to Congress later today will have a material impact on the global financial markets…

At the time of writing, the EUR was down by 0.02% to $1.1206.

For the Pound

It’s a particularly busy day ahead.

From the economic calendar, Industrial and manufacturing production, trade data and GDP numbers are due out.

The GDP and manufacturing production numbers will be the main area of focus. Economic indicators have raised some red flags going into the 2nd quarter. Any weak numbers and expect the Pound to take another hit. The BoE is now largely expected to cut rates later in the year, barring a miraculous turnaround on Brexit…

Outside of the numbers, the last leadership race live televised debate will also draw attention.

Boris Johnson continued to be the favorite, though the odds have narrowed…

At the time of writing, the Pound was down 0.1% to $1.2452.

Across the Pond

It’s a big day for the Greenback. While there are no material stats due out later this afternoon, FED Chair Powell’s testimony to Congress will be of material influence.

Any talk of leaving rates unchanged near-term and positive sentiment towards the economy and expect the Dollar to rise at the expense of the global equity markets.

With the U.S – China trade negotiations back on track, Powell may take the opportunity to sit back and wait to see how things progress. Unlike other economies, the U.S economy is still ticking along and labor market conditions remain tight…

Late in the U.S session, the FOMC meeting minutes are also due out and will have some influence, though how much influence will depend on Powell’s testimony. A dovish Powell would likely make the minutes more relevant, particularly if Powell discounts last week’s NFP numbers.

At the time of writing, the Dollar Spot Index was up by 0.03% to 97.523.

For the Loonie

It’s also a big day ahead for the Loonie. While there are no material stats due out, the Bank of Canada’s interest rate decision will influence.

Few are expecting a rate cut, which leaves the focus on the monetary policy report, rate statement and press conference that comes later in the day.

Will the BoC signal a need to cut rates in the coming months or will it be status quo?

The Loonie was flat at C$1.3128, against the U.S Dollar, at the time of writing.

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