Yahoo Finance UK Stats and FED Chair Powell Put the GBP and USD into Focus
Earlier in the Day:
Following a relatively busy start to the week, with the markets responding to slower growth in China, stats through the Asian session were limited to 2nd quarter inflation figures out of New Zealand, with the RBA meeting minutes also released later in the session.
For the Kiwi Dollar, 2nd quarter inflation figures came up short of forecasts, with consumer prices rising by 0.4%, quarter on quarter, which fell short of a forecasted and 1st quarter 0.5%. Year-on-year, consumer prices rose by 1.5%, falling short of a forecasted 1.6%, while coming in ahead of the 1st quarter’s 1.1%.
NZ Stats reported that the 1.5% rise in inflation was mainly attributable to higher prices for housing and household utilities, with gains of 0.9% and 3.1% in the quarter and in the year, respectively.
Housing-related costs included:
8% increase in rents, quarter-on-quarter and a 2.5% increase, year-on-year.
Construction of new dwellings rise by 1.1%, quarter-on-quarter, and by 3.9% year-on-year.
Electricity prices rose by 1.7%, quarter-on-quarter, and by 2.9% year-on-year.
Elsewhere, increases in petrol prices were offset by falling prices for used cars and home entertainment.
The Kiwi Dollar moved from $0.67684 to $0.67765, recovering from an initial dip to $0.67556, with the year-on-year figure supporting the Kiwi in the early hours. At the time of writing, the Kiwi Dollar was down 0.78% to $0.6830.
For the Aussie Dollar, there were no surprises in the RBA meeting minutes, as the RBA continued to focus on tepid wage growth and household debt that continues to raise concerns over domestic consumption, with any rise in borrowing costs expected to be a negative for the economy in general.
In spite of the concerns, the RBA continued to advise that the next move was likely to be upwards, which was also in line with previous statements. While forward guidance may point to an upward move, much will depend on the outcome of the ongoing trade war between the U.S and key trading partners, an extended trade war expected to hit the global economy that would sink demand for raw materials and the Australian economy with it.
The Aussie Dollar moved from $0.74178 to $0.74147 upon release of the minutes, before moving to $0.7434, up 0.20% for the session.
Elsewhere, the Japanese Yen was down again against the Dollar, falling 0.12% to ¥112.43 against the Dollar, the losses coming in spite of the slide in the equity markets and Trump’s latest best friend discovery in Putin.
In the equity markets, the Nikkei bucked the trend following Monday’s holiday, rising by 0.78% ahead of the close, supported by the weaker Yen, while the Hang Seng, CSI300 and ASX200 saw red, with a slide in mining & resources and tech stocks weighing through the session.
The Day Ahead:
For the EUR, it’s another quiet day for the EUR, with key stats scheduled for release being limited to finalized June inflation numbers out of Italy.
The numbers are unlikely to have a material impact on the EUR, which was the beneficiary of a falling Dollar on Monday, as the markets responded to the U.S President’s latest political roadshow.
At the time of writing, the EUR was up 0.04% to $1.1716, with any chatter from the Oval Office on EU tariffs a possible influence later in the day as the Helsinki dust settles.
For the Pound, it’s the start of 3 particularly important days on the data front, with this morning’s stats including May’s wage growth and unemployment numbers, together with June’s claimant count change figures.
For the BoE hawks, steady unemployment and an uptick in wage growth would be the perfect cocktail for an August rate hike, with the UK economy having bounced back from the woes of the 1st quarter and the annual rate of inflation forecasted to see an uptick in tomorrow’s June figures.
At the time of writing, the Pound was up 0.08% to $1.3245, with today’s data the key driver, though there is always Brexit chatter to hit the markets. One does wonder whether Trump’s latest political move in Russia will inspire the EU take a different approach with the UK and Brexit.
Across the Pond, economic data out of the U.S is limited to June industrial production figures that are forecasted to be Dollar positive, though any moves will likely be on hold as the markets look to FED Chair Powell’s first day of testimony to the Senate, where the FED’s view that a trade war between the U.S and China would have limited impact on policy will likely be questioned.
Any questions on the FED’s monetary policy structure will also influence as will any references to the FED’s willingness to allow a near-term overshoot of inflation from the FED’s 2% objective, continuingly tepid wage growth, coupled with rising borrowing costs, an acceleration in the annual rate of inflation and a trade war certain negatives from a domestic consumption perspective.
At the time of writing, the Dollar Spot Index was 0.03% to 94.486, with direction through the day likely to be hinged on Powell’s testimony and any fallout from Trump’s Helsinki trip in focus, though Trump could look to divert attention by returning to trade.
For the Loonie, stats through the day are limited to May manufacturing sales figures that are forecasted to be positive, though a slide in crude oil prices and continued trade tensions are likely to limit any moves in spite of the Bank of Canada being more interested in the data than trade war chatter.
At the time of writing, the Loonie was up 0.09% to C$1.314 against the U.S Dollar, with today’s stats and the Oval Office key drivers through the day.
This article was originally posted on FX Empire
