Daily Insight

Following on from last week, the Dollar continued to rally against Sterling ahead of the FOMC rate announcement this Thursday and we touched new lows towards the latter part of the week, briefly trading under 1.8200 for the first time in two months. Following the untimely death of MPC member David Walton last week, the Pound has come under some intense pressure and the Dollar was given a further boost on Friday as orders for U.S durable goods excluding transportation rose 0.7% in May. This goes some way to ease concerns that higher interest rates are beginning to have a cooling effect on the U.S economy. We have a string on significant data released in the States this week and as I mentioned, the Federal Reserve will convene on Thursday to announce their latest move towards monetary tightening with many investors pricing in a quarter-point jump to 5.25% with a 50:50 chance of a further rate rise next month. There is some important data released this afternoon with New Home Sales widely anticipated to decline to 1.16 million in May as the threat of rising interest rates and higher mortgages discourage first time buyers.

The Pound has been struggling in the past week particularly since the death of David Walton, which has left UK interest rate expectations severely muted in the short term and with a light calendar this week in terms of UK economic data released, Sterling may come under further pressure against the majors as we trade down towards that significant level at 1.4500 versus the Euro. There is some UK data released on Wednesday with the CBI Distributive Trades survey and UK consumer confidence on Friday, which is expected to show a slight decline in the figures released for June.

The Euro has been steadily gaining against the Pound in the past week or so and we have a significant week ahead of us with the German ifo business climate index released tomorrow and investors are anticipating a strong figure with the consensus forecast suggesting the index dropped slightly in June from the cyclical high last month. The focal point of this week in terms of data released in the euro-zone will be the flash HICP for June and the May M3 figures on Thursday, both of which are expected to support the view of higher interest rates. Elsewhere, headline euro-zone inflation is expected to remain relatively high in June with the initial estimate coming in at 2.3%, which is still well above the ECB's preferred measure and provides further evidence that the central bank will need to continue raising their benchmark interest rate from the current 2.50%.

Data Released 26th June

EU 09:00 Current Account (April)

U.S 15:00 New Home Sales (May)

written by Adam Solomon