Daily Market Report 16/07/2013

It was a quiet day in the markets yesterday with the only notable data coming out from the US.

Data from the US Commerce Department revealed that retail sales only grew by 0.4% in June from 0.5% in May, instead of a growth of 0.8% increase in June.  The Empire State manufacturing index rose to a five month high of 9.5 in July from 7.8 in June, beating expectations of a reading of 5. Whilst the data was mixed, the US dollar did weaken off the back of the news immediately following the announcements but as the rest of the afternoon played out the US dollar managed to regain some ground.

After European markets closed, credit rating agency Fitch downgraded the European Financial Stability Facility (EFSF) to AA+.  The EFSF is the bailout fund which helped finance several of the euro zone bailouts.

In the latest minutes, the Reserve Bank of Australia stated that the recent reductions in the headline interest rate and the decline in the Australian dollar meant its current policy setting was appropriate.  However the RBA did reiterate that given its current inflation outlook, there could be scope for further easing. The comments were a less dovish than investors were expecting and thus the Australian dollar managed to gain following these comments.

Looking ahead to today, the rate of inflation from the UK, euro zone and in particular from the US will all come into focus. In last week’s minutes from the FOMC, the Fed indicated that one of the factors required to begin tapering their quantitative easing program would be for inflation to reach its target of 2%. Expectations are for the rate of inflation in the US to rise to 1.6% in June from 1.4% in May.

German sentiment figures, to be released this morning, are forecasted to improvement in July; which may well continue to support the euro and keep GBPEUR in its current choppy downtrend.

Key Announcements:

9.30am – GBP – Consumer Price Index (YoY) (Jun): Expected to rise to 3%.

9.30am – GBP – Producer Price Index (Jun): Expected to rise to 1.9%.

9.30am – GBP – DCLG House Price Index (May): Expected to rise to 2.9%.

10.00am – EUR – Consumer Price Index (YoY) (Jun): Expected to rise to 1.6%.

10.00am – EUR – ZEW Survey on Economic Sentiment (Jul): Expected to increase to 31.8.

10.00am – EUR – German ZEW Survey on Economic Sentiment (Jul): Expected to increase to 39.6.

10.00am – EUR – German ZEW Survey on Current Situation (Jul): Expected to increase to 9.

11.30am – GBP – MPC Member Paul Fisher Speech.

13.30pm – USD - Consumer Price Index (YoY) (Jun): Expected to rise to 1.6%.

13.30pm – USD – Industrial Production (MoM (Jun): Expected to increase to 0.2%.