Daily Market Report 31/07/2013

The pound continued to fall against the majority of its counterparts yesterday ahead of key announcements by the Bank of England over the coming weeks

In the absence of any economic data, investors drove down the value of the pound as investors continue to remain cautious ahead of this week’s interest rate and monetary policy decision and in particular ahead of next week’s quarterly inflation report, where the BoE will signal its intentions and lay out its plans for forward guidance on interest rates.

Data from euro zone was fairly mixed as business climate and services sentiment improved in July, whilst the economic sentiment indicator and industrial confidence both weakened in July. The rate of inflation in Germany however did rise from 1.8% to 1.9% in July prompting support for the euro against the pound and the US dollar.

Euro zone inflation data is due for release this morning, with expectations for the rate to increase from 1.2% to 1.6%. This may alleviate any thoughts that market had that the ECB may look to lower interest rates even lower.

The US dollar gained further ground yesterday as those investors who were selling the US dollar last week booked profits ahead of key data today and on Friday. Indeed the US dollar will be the main focus of the markets today as second quarter GDP figures are set to show that annualised growth slowed to 1.2% from 1.8%. The key event today will no doubt be the Feds monetary policy statement and interest rate decision, due for release later in the evening.

Key Announcements:

10.00am – EUR – Consumer Price Index (Jul): Expected to increase to 1.7%.

10.00am – EUR – Unemployment Rate (Jul): Expected to remain at 12.2%.

12.00pm – USD – MBA Mortgage Applications (Jul):  Fell by 1.2% previously.

13.15pm – USD – ADP Employment Change (Jul): Expected to fall to only 182,000 new jobs added.

13.30pm – CAD – Gross Domestic Product: Expected to rise to 0.3%.

13.30pm – USD – Gross Domestic Product Annualised (Q2): Expected to slow to 1.2%.

19.00pm – USD – Fed Interest Rate Decision: Expected to remain at 0.25%.

19.00pm – USD – Fed’s Monetary Policy Statement and Press Conference.