Daily Market Report 01/07/16

GBP

The main headline of the day was Governor of the Bank of England, Mark Carney saying the BoE could ease monetary stimulus over the summer following the shock result of a Brexit.  The Monetary policy committee will make their initial assessment of the situation on July 14th after its next scheduled meeting and thus paving the way for the announcement of an interest rate cut at the August meeting, moving the interest rate lower than the current record low of 0.5%. 

Sterling had slowly posted minor gains across the board following the Brexit as investor risk appetite looked to improve, however this was completely reversed following the announcement from Mark Carney.   

Early on yesterday we saw the current account deficit and final GDP QoQ figures published with both having a very minimal impact on the market. The current account deficit showed a minor contraction to -32.6B against a previous of -34.0B and the GDP figure coming out exactly in line with both previous and forecast at 0.4%.

USD

The weekly unemployment claims figure form the US was printed marginally better than forecast at 286k against a forecast of 287k. Nevertheless, the four-week moving average claims, considered to be a better measure of the labour market trends  as it irons out week-to-week volatility, was left unchanged at 266,750. 

Although the figure is commonly associated as a key indicator to economic health, many investors are more concerned or focused on the forward guidance surrounding a potential rate hike, if any. Given the recent Brexit vote, the Fed will be keeping a close eye on the systemic ramifications on global financial markets and how this impacts the US economy and job market. 
 

EUR

It is widely expected that the ECB will again expand the current monetary policy in a bid to push inflation to their target level of 2%. Although current expansionary monetary policy measures have proven to have be positive for inflation; it is yet to have the desired effect which has also been exacerbated by the vote for Britain to leave the EU last week. The ECB is unlikely to follow the BoE with an immediate response to the prospect of further monetary policy easing, preferring to wait for more tangible evidence that the expected negative impact is materialising. 
 

Key Announcements

09.30 – GBP: Manufacturing PMI, forecast to fall to  50.0 from 50.1

15.00 – USD: ISM Manufacturing PMI, forecast to remain unchanged at 51.3