Daily Market Report 05/08/2013

Friday started well for the pound as the UK posted two positive results in the form of the Nationwide house prices and the PMI Construction data - both outperformed expectations.

The key data once again came from the US as the nonfarm payrolls and unemployment rates were announced. The overall unemployment rate in the US dropped more than expected to 7.4% down from 7.6%. This will be viewed by investors as a key indicator as to then the Fed will reduce QE as earlier in the year, Bernanke stated he wants to see the overall unemployment rate at 6.5% before scaling back the QE. The number of jobs added to the US jobs market (non-farms) fell below expectations by almost 20k. The overall effect was dollar weakness on Friday afternoon closing just above 1.53.

This week initially focuses on services PMI from the euro zone, UK and the US. Expansion in the US and the UK is expected with Europe potentially still struggling to meet expected figures. Euro zone retail sales are also due later today with a forecast result of -1.3% for the month of June.

Later in the week, the Bank of England quarterly inflation report is due which represents the biggest risk event in the calendar for the UK. Will the Bank announce any new policies? All eyes will be on Mark Carney on Wednesday morning for any clues as to what George Osborne and the Bank have decided in terms of keeping inflation under control with little or no room for interest rate hikes in the near future.

Further afield, the Australian dollar has weakened further following news that the general election in Australia will occur on September 7th. Further to this, the Reserve Bank in Australia is expected to cut interest rates on Tuesday. If this is the case, the recent levels on the Australian dollar (currently highest in 3 years) could be extended.

GBPINR also made a fresh record high on Friday and we are continuing to see further strength in the pound today.

Key Announcements:

8.58am – EUR – Markit Services PMI (Jul): Came in better than expected to 49.8.

9.28am – GBP – Market Services PMI (Jul): Expanded further to 60.2.

9.30am – EUR – Sentix Investor Confidence (Jul): Improved to -4.9.

10.00am – EUR – Retail Sales (Jun): Expected to fall 1.2%.

15.00pm – USD – ISM Non-Manufacturing PMI (Jul): Expected to expand further to 53.