Daily Market Report 30/07/2013

The US dollar made broad gains yesterday in very thin trade following slightly better than expected data from the US.

US pending home sales fell by 0.4% in June, less than the expected 1% decline that the market was anticipating after a rise of 5.8% in May. Markets seem to be cautious ahead of some key data from the US this week; US second quarter GDP figures and the Fed monetary policy statement are due for release on Wednesday and non-farm payrolls and unemployment figures are due for release on Friday.

The UK suffered some weak data yesterday morning after mortgage approvals for June fell below May’s figures as well falling below market expectations.  But net lending to individuals rose from £1.2bn in May to £1.5bn in June surpassing a rise of £1.4bn. Also the UK’s retail sector had some encouraging news after the monthly CBI retail sales index jumped to 17 in July from 1 in June, with the recent heatwave being attributed to the rise in sales.

However the impact of the data on the pound was fairly muted given Thursday’s monetary policy statement by the Bank of England. Whilst expectations remain for the key interest rate to remain at 0.5% and the monthly asset purchasing to remain at £375bn, investors will be looking for any further hints as to future guidance on monetary policy.

In the euro zone the European Commission declared that Greece’s bailout remains on track and they remained confident that Greece will return to growth in 2014. Expectations remain for growth to shrink by 4.2% this year but then to rise to 0.6% in 2014.

Overnight we saw the Australian dollar weaken by 1.4% against the pound following poor building permits data, which dropped 6.9% in June instead of rising 2.3% as the market was expecting. More importantly however Reserve Bank of Australia Governor Glenn Stevens commented that second quarter inflation data suggests that there is still room for the RBA to lower interest rates further if necessary. The RBA interest rate decision is due for release on Tuesday 6th August.

Consumer confidence figures are due for release from the euro zone, UK and the US today; with data from all three areas set to show a marginal improvement. German inflation will also be on the agenda with no change expected by investors.  Service sector and industrial sector sentiment is also forecasted to improve so don’t be surprised by further euro strength in what otherwise looks to be a quiet day in the markets.

Key Announcements:

10.00am – EUR – Consumer Confidence (Jul): Expected to improve to -17.4.

10.00am – EUR – Business Climate (Jul): Expected to improve to -0.55.

10.00am – EUR – Economic Sentiment Indicator (Jul): Expected to improve to 92.6.

10.00am – EUR – Services Sentiment (Jul): Expected to improve to -9.

10.00am – EUR – Industrial Confidence (Jul): Expected to improve to -10.3.

13.00pm – EUR – Consumer Price Index (Jul): Expected to remain at 1.8%.

15.00pm – USD – Consumer Confidence (Jul): Expected to improve to 81.5.

00.01am – GBP – Gfk Consumer Confidence (Jul): Expected to improve to -19.