Newsletter – 4th August 2017

Morning Bulletin

Yesterday

  • There was just the one key print yesterday morning and that came in the form of UK Services PMI. The reading of 53.8 was ever so slightly better than the expected 53.6 and on the face of it seemed encouraging. However one component of the Index is overall business confidence and that was measuring at its lowest level in 4 years.
  • Yesterday afternoon was of course dominated by the Bank of England’s ‘Super Thursday’; dubbed as such due to the combination of the Monetary Policy Committees decision on interest rates (Incl rate votes and statement) and the release of the BOE’s quarterly inflation report.
  • Highlights/Key Points included:
    • Key Interest Rate was left on hold at 0.25% in a 6-2vote.
    • Uncertainty about Brexit will weigh on growth, as such the BOE has downgraded forecasts: GDP 2017+1.7% (+1.9% prior); GDP 2018 +1.6% (+1.7% prior)
    • Inflation expected to peak at about 3% in October, as higher import prices from the decline in sterling rates continue to feed through to shop prices.
    • The BOE also expected wage growth to remain suppressed, revising 2018 wage growth down to 3% from a prior 3.5%.
  • The decision to hold rates at 0.25% in a 6-2 vote was widely expected, and so initially Sterling was only slightly sold off in FX space. However following the MPC statement and Governor Mark Carney’s press conference the Pound was hammered as the rhetoric was very much seen as dovish (rates lower for longer).
  • By the end of trading GBP/EUR was down 0.78% (1.1067); GBP/USD was down 0.67% (1.3134); and the biggest drop was in GBP/JPY which was down 1.18% (144.72).
  • There were also a couple of key US prints released yesterday afternoon, Unemployment Claims was largely in-line at 240K (242K Exp) but an ISM Non-Manufacturing PMI reading of 53.9 fell comfortably short of the expected 56.9. That was also the lowest reading since September 2016.
  • The US Dollar index plummeted once again following this soft data.
Overnight

  • Australian Retail Sales m/m 0.3% (0.2% Exp)
  • The latest RBA Monetary Policy Statement revealed that the Central Bank lowered its 2017 GDP forecast range to 2-3%(2.5%-3.5% prior). The RBA revised the figure down due to the stronger Aussie Dollar’s impact on economic growth.
  • German Factory Orders m/m 1.0% (0.6% Exp)
  • Speaking on BBC Radio this morning, Bank of England Dep Gov. Ben Broadbent said he thinks there is some possibility that interest rates will go up in a little bit.
Today
  • Absolute raft of Canadian and US data this afternoon, kicking off at 1.30pm.
  • Key as always will be the US Non-Farm Employment Change print with 181,000 additional people expected to have gone into employment during July.

 

Currency Pair Interbank Rate % Change on Day
GBP/EUR 1.1068 +0.02
GBP/USD 1.3149 +0.10
EUR/USD 1.1881 +0.11
AUD/USD 0.7978 +0.40

 

Time (GMT) Region Data Release Forecast Previous
09.00 EUR Italian Retail Sales m/m 0.1% -0.1%
09.10 EUR Eurozone Retail PMI 53.2
13.30 CAD Employment Change 11.7K 45.3K
13.30 CAD Trade Balance -1.3Bn -1.1Bn
13.30 CAD Unemployment Rate 6.5% 6.5%
13.30 USD Average Hourly Earnings m/m 0.3% 0.2%
13.30 USD Non-Farm Employment Change 181K 222K
13.30 USD Unemployment Rate 4.3% 4.4%
13.30 USD Trade Balance -43.9Bn -46.5Bn
15.00 CAD Ivey PMI 59.2 61.6