Daily Market Report 28/07/16

GBP

Sterling edged down against the dollar and euro on Wednesday, refusing to be lifted by second-quarter UK growth data that was stronger than had been expected, though backward-looking. Britain's economy grew by 0.6 percent during a second quarter that ended with a vote to leave the European Union, up from 0.4 percent in the first three months of 2016. Those numbers incorporated just a week of the period after the June 23 vote, but retail sales numbers released later that covered sales between June 28 and July 14 showed their sharpest fall in four years, raising doubts about the ability of consumers to stave off a Brexit recession.
 
Sterling hit a two-week low on Tuesday after BoE policymaker Martin Weale said Friday's weak purchasing managers' index (PMI) surveys would be "very material" for the bank's next policy meeting. He had said last week that more evidence of economic weakness was needed before he would back an interest rate cut.
 
The BoE surprised markets in July by not cutting the benchmark borrowing cost from its record low of 0.5 percent. But minutes of the decision showed most policymakers expected to support an unspecified package of measures to boost the economy at the Bank's meeting next week.

 

USD

The Federal Reserve left interest rates unchanged while saying risks to the U.S. economy have subsided and the labour market is getting tighter, suggesting conditions are getting more favourable for an increase in borrowing costs.
 
“Near-term risks to the economic outlook have diminished,” the Federal Open Market Committee said in its statement Wednesday after a two-day meeting in Washington, before repeating language from June that the panel “continues to closely monitor” inflation and global developments. Job gains were “strong” in June and indicators “point to some increase in labour utilization in recent months,” the Fed said.
 
U.S. central bankers are taking stock of the economy’s progress in the wake of the U.K.’s vote last month to leave the European Union, as well as the large swing from May’s soft labour report to June’s rebound. While Chair Janet Yellen has repeatedly stated that the Fed is likely to raise interest rates gradually, market volatility and the unexpected dip in job gains have delayed such plans. The greenback posted initial gains following the statement of diminishing near-tern risk on economic outlook but then quickly revised itself indications of a possible September rate hike were not seen as very strong.
 

Key Announcements

13.30 - USD : Unemployment Claims, forecast at 261k against a previous of 253k