07/07/2017 - Sterling dips after weak UK Manufacturing Data

GBP

Sterling has remained stubbornly resilient despite yesterday’s disappointing services PMI data which completed a hat-trick of negative private sector figures for June. Data wise, focus is now on today’s release of manufacturing and industrial production figures which are expected to come out positive. 

Chief EU negotiator Michel Barnier yesterday warned British ministers that leaving the single market and the customs union,  whilst simultaneously achieving a "frictionless trading" relationship with the EU are two mutually exclusive possibilities. 

Speaking at a business forum in Brussels yesterday, Barnier cited disruption to cross-border traders processing value-added tax (VAT) and a need for all EU imports of animals and animal products to be tested at borders, issues which are of particular concern to Ireland, an economy with a dominant agricultural sector.

In addition, Barnier stressed that Britain is against the clock to reach an agreement and also said that he was prepared to handle the possibility of "no deal”, although it would be damaging. 

USD

The dollar index fell 0.24% yesterday after disappointing data on U.S. private sector hiring. A report published yesterday showed that only 158,000 jobs were created by U.S. private sector employers, well below economists’ expectations. The slack in the dollar was further compounded by reports showing a 1.6% increase in initial jobless claims. Data wise, all eyes are now on today’s US Labour Department’s non-farm payrolls report which is expected to show jobs growth of 175,000 in June.

The downbeat figures come after Wednesday’s FOMC meeting minutes for the month of June in which it hiked rates. From the minutes it was evident that there was a degree of division between policy makers over the inflation outlook for the US economy and its potential impact on future interest rate decisions. 

The subdued outlook has led investors to question the Fed's capacity to stick to its plans for tightening monetary policy.

Key Announcements 

09:30 – GBP: Manufacturing Production m/m; Forecast at 0.5% against a previous of 0.2%

13:30 – USD: Average Hourly Earnings m/m; Forecast at 0.3% against a previous of 0.2%

13:30 – USD: Non-Farm Employment Change; Forecast at 175K against a previous of 138K

13:30-USD: Unemployment Rate; Forecast to remain unchanged at 4.3%

Tentative-GBP-Bank of England Governor Mark Carney speaks

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