Daily Market Report 12/08/2013

The US dollar bounced off seven week lows and managed to regain some ground on Friday, in what was otherwise a fairly lacklustre day for the markets.

On the data front, the UK showed on Friday that the trade deficit narrowed to its lowest level in nearly a year in June and a separate report showed that the U.K. construction sector expanded in the second quarter, adding to signs that the recovery is gaining traction. However the data, surprisingly, had little impact in supporting the pound.

The only other notable data came from Canada’s labour market where the unemployment rate increased to 7.2%, with the number employed people fell by 39,400 in July.

The minutes of the August Bank of England monetary policy meeting will be in focus this week and more importantly the latest unemployment figures, given the tie-in between a rise in interest rates and a reduction in unemployment.

Data wise, retail sales figures from the UK and US will be in focus as well as the latest rate of inflation from the two economies and also from the euro zone.

Remember one of the key factors in order for the Federal Reserve to taper their monetary stimulus program, is for inflation to reach the targeted 2%; which is indeed what analysts are expecting this week. Thus we could see strength in the US dollar following this data on Thursday.

From the euro zone, the latest ZEW survey on economic sentiment is set to show a vast improvement in July and thus the recent support for the euro could well be sustained as the week progresses.

Japan revealed some disappointing data as the annualised growth rate came in at 2.6% in the second quarter, well below the forecasted 3.6% markets were expecting

Key Announcements:

19.00pm – USD – Monthly Budget Statement (Jul).