Daily Insight

Following on from last week, the Dollar declined against the majors on Friday after the U.S monthly job report showed that the economy only added 121,000 jobs in June, despite forecasters predicting that Nonfarm payrolls would increase beyond 150,000 last month. The unemployment rate remains unchanged at 4.6% but it seems that the seemingly buoyant U.S labour market is beginning to subside into the third quarter. This will bolster speculation that the Federal Reserve will hold U.S interest rates in August and therefore the consumer data released this week in the States will take on added significance as investors look for further evidence that the Fed will pause at 5.25% next month. The focal point in terms of U.S data released this week will be Retail Sales for June with both headline and core sales widely expected to rise by 0.4% from May. Elsewhere, the U.S Trade Deficit is released on Wednesday and forecasters are anticipating that the gap in goods and services has widened to $65 billion in June primarily due to sky-high oil prices, which will undoubtedly have an effect on U.S imports.

Following the hawkish tone of the ECB press conference last week with regard a further tightening of monetary policy, the Euro has been making further gains against the Pound and the Dollar as investors raise the possibility of a rise in euro-zone interest rates next month. Therefore, the ECB monthly bulletin on Thursday will be watched closely for a further indication that the Central bank will lift rates again in August. In addition, there is also some important inflationary data released this week, which will give us an insight into economic growth in the first quarter with price pressures already above the ECB's comfort zone.

The Pound has been under some pressure of late despite some obvious improvement in the manufacturing and services sector. The Bank of England elected to hold UK interest rates at 4.50% and it will be interesting to see how the seven-strong committee voted in the minutes of the meeting released next week, particularly since David Walton, the sole voice for a rise in rates unexpectedly died last month. The main focus this week in terms of data released will be the UK trade balance, which is widely expected to narrow slightly in May but there is some significant data released this morning with the Producer Price Index and BRC retail sales survey. The consensus forecast is for Input and Output prices to show modest growth in June primarily due to rising energy costs while the BRC sales report should provide an insight into the pace of consumer spending in the second quarter.

Data Released 10th July

UK 09:30 Producer Price Index (June)
- Input & Output

UK 11:00 BRC Retail Sales Survey (June)

U.S 15:00 Wholesale Inventories (May)
U.S 20:00 Consumer Credit (May)

written by Adam Solomon