Daily Market Report 21/07/16

GBP

Sterling rose against the euro and a broadly stronger dollar on Wednesday after a Bank of England survey showed no clear evidence of a slowing of economic activity after last month's Brexit vote. The survey reported signs that demand for credit was easing and that there were lower expectations for investment spending, however the survey did also go on to say there was no expectation of any near-term impact on capital spending from the Brexit vote.
 
Yesterday also saw the initial claimant count change for the UK released much better than previous at 0.4K against a previous of 12.2K. Again as with Tuesday’s inflation figure, the pound edged higher off the back of the positive data, however any gains that were made were very much short lived as the pound quickly retraced back down as investors are selling of any gains in sterling in the expectation that sooner or later the economy will slow substantially.

 

USD

The dollar rose on Wednesday, hitting its highest level in four months against a basket of currencies, as expectations rose that the Federal Reserve would tighten monetary policy. The dollar has benefited recently from strong readings on the U.S. labour market and inflation, which have boosted bets the Fed will raise U.S. interest rates before the end of the year. Fed funds futures rates show investors see a greater than 50 percent chance the Fed will raise interest rates at least once by its December meeting.

Wednesday was the first time chances of a rate hike have moved above 50 percent since Britain's surprise vote to leave the European Union in June. The dollar index, which tracks the currency against a basket of six major rivals, hit a peak of 97.323 in European trade, its highest level since March 10. It was last trading at 97.073, little changed on the day.

 

Key Announcements

09:30 – GBP: Retail sales MoM; Forecast at -0.4% against a previous of 0.9%

13.30 – EUR: ECB Press conference

13.30 – USD: Philly Fed Manufacturing; Forecast at 5.1 against a previous of 4.7

13.30 – USD: Unemployment claims; Forecast at 271K against a previous of 254K