The Pound made significant gains against both the Euro and the Dollar yesterday and with the ECB interest rate announcement due at midday today, it looks increasingly likely that Euro buyers would be well advised to take advantage of the current rate. Sterling firmed up a further 0.4% against the Dollar yesterday and closed towards the yearly high at 1.4850 against the Euro amid the release of some surprisingly strong UK retail data. The Confederation of British Industry distributive trades survey came in much better than expected as consumers returned to the highstreet in August and the Pound has made gains on speculation that the Bank of England with have the room to raise UK interest rates once more this year. That sentiment was further emphasised in a report from the BoE on UK mortgage approvals, which rose to a six-month high in July with the number of home loans approved reaching 120,000. This suggests that growth in the UK housing market continues to flourish and the data released this morning has showed that house price inflation accelerated at the fastest pace in a year this month according to the Nationwide survey with the average cost of a home rising 6.6% from a year earlier. Elsewhere, the Pound may make further gains this morning with UK consumer confidence widely expected to mirror the CBI trades survey as a pickup in spending propels economic growth.
Without doubt, the focus today will fall on the ECB interest rate announcement and accompanying press conference. It is widely anticipated that the Central Bank will hold Euro-zone interest rates at 3.0% in September but the Euro may stage a recovery against the Pound if the Chairman, Jean-Claude Trichet, signals a further tightening of rates in October. Usually, policy makers within the ECB give the market notice of a rate hike a month prior to the announcement and the sort of language used in the statement will become evermore significant with the term “vigilant” used as a trigger for an impending rise in interest rates. Therefore, it looks increasingly likely that Euro buyers would be well placed to take advantage of the current rate as a correction in the market looks imminent particularly if we get a good indication today that a rise in rates is likely over the coming months. In addition, there is some significant economic data released this morning that could add weight to calls for higher interest rates in the 12 nations sharing the Euro with the Flash Consumer Price Index expected to ease slightly in August from an annual rate of 2.4% last month. Elsewhere, a report of Gross Domestic Product may increase significantly in the second quarter with forecasters anticipating that economic growth accelerated to 0.9% with the core rate up 2.4% from 2.0% in the first quarter.
The Dollar came under further pressure yesterday amid a soft report on U.S economic growth in the second quarter. The revised estimate for GDP increased to an annual rate of 2.9%, which was slightly ahead of expectations but may point to slowing growth over the coming months. Significantly higher interest rates and rising energy prices have had a devastating effect on the U.S housing market and personal spending, which accounts for a large proportion of the economy, is expected to weaken further this year, fuelling speculation that the Federal Reserve won’t raise interest rates again in order to prevent the economy from overheating. However, a report this afternoon on U.S personal income and expenditure, the Fed’s preferred measure of U.S inflation, is widely expected to show that consumer spending in the States rose by the most on six months in July as a rise in personal income supplements near-record petrol prices. Spending accounts for two thirds of the U.S economy and economists estimate that a significant drop may slow economic growth to a degree that the Federal Reserve will be able to keep interest rates on hold. However, the report this afternoon may give the Dollar a reprieve as Personal income is expected to rise by 0.8% in July from 0.4% in June.
Data Released 31st August
UK 10:00 Consumer Confidence (August)
GER 08:55 Unemployment (August)
EU 10:00 Flash Consumer Price Index (August) EU 10:00 Gross Domestic Product (Q2) EU 10:00 EC Economic Sentiment (August) EU 12:45 ECB Interest Announcement & Press Conference at 13:30
U.S 13:30 Initial Jobless Claims (w / e 26th August) U.S 13:30 Personal Income & Expenditure (July) U.S 15:00 Factory Goods Orders (July) U.S 15:00 Chicago PMI (August)
The Dollar came under increased pressure yesterday amid the release of some soft consumer sentiment data, which showed that confidence in the U.S had dropped to a nine-month low in August following a dramatic slowdown in the housing market and concerns over rising energy prices that in turn have a negative impact on job prospects as employers attempt to curb spending. The index fell by more than expected this month to a reading of 99.6 from 107.0 in July, the biggest single decline since the devastation caused by Hurricane Katrina last year. However, the Dollar reacted curiously against the Pound, strengthening towards 1.8900 as the survey also pointed to higher inflation concerns among the American consumer. Inflation expectations over the next year rose to 5.5%, up from 5.1% last month and the gauge will prompt speculation that the Federal Reserve may raise interest rates once more before the turn of the year. Although, the relative appetite for the Dollar was short-lived as the minutes from the Fed’s last policy meeting were released yesterday evening, signalling that a further tightening of monetary policy was unlikely this year as the slowdown in economic growth eases inflation. In addition, Fed policy makers also suggested that the current lending rate of 5.25% was “consistent with satisfactory economic performance”, which indicates a further rise in interest rates could ‘over-heat’ the economy.
There is some significant economic data released this afternoon in the States that could potentially drive the Dollar with the release of the ADP Employment report for the month of August, which is widely expected to show a rise from 99,000 in July to 115,000 this month and should provide an insight into the monthly job report on Friday. Elsewhere, the revised GDP estimate for the second quarter will provide an indication of economic growth in the States and forecasters are anticipating an increase to 3.1% from 2.5% in the first quarter, while the annual growth rate may stay unchanged at 3.3%. However, if economic growth has moderated by more than expected then we can expect the Dollar to come under pressure against the majors as speculation will intensify that the next move for the Fed will be a cut in rates.
There was a sparse supply of economic factors in the Euro-zone yesterday with the focus falling on German consumer confidence, which increased to a near five-year high in August. The Euro also received a boost ahead of the interest rate announcement tomorrow on speculation that the ECB chairman, Jean-Claude Trichet, will signal a further rise in rates in October while the Fed and the BoE hold their benchmark rate steady. It is widely anticipated that the Central Bank will keep rates on hold at 3.0% tomorrow following a rise earlier this month but we can expect the Euro to make further gains against the Pound if Trichet maintains his hawkish stance towards a further tightening of monetary policy before the end of the year.
The Pound has been gaining over the past week as economic growth continues to show signs of accelerating while house prices have also increased this month indicating that the Bank of England will have the scope to raise interest rates further following the surprise move in August. Despite a lack of fundamental data released, Sterling has made significant gains against the Dollar in the past 24hrs as comments from Gordon Brown have seemingly boosted growth expectations. The Chancellor’s belief that UK economic growth will come in ahead of the Treasury’s forecast this year has increased speculation that the BoE will need to lift interest rates again over the coming months with the next meeting scheduled for early September. There is some significant data released in the UK this morning including the CBI Distributive Trades survey, which provides an indication of short-term trends in the UK retail sector with forecasters anticipating a modest drop in August, while UK mortgage approvals may ease slightly in August fro 120,000 last month.
Data Released 30th August
UK 09:30 Mortgage Approvals (July) UK 11:00 CBI Distributive Trades Survey (August)
Following on from last week, the Pound received an unexpected boost on Friday as economic growth in the second quarter came in largely in line with expectations although personal consumption increased by 1.0%, which was slightly more than expected and provides an indication that the UK consumer remains in relatively good health despite this month’s surprise increase in interest rates. UK markets were closed yesterday following the Summer Bank Holiday but there was some significant data released in the form of the Hometrack House Price index, which showed that prices rose 0.4% in August, pushing the annual rate to 3.9% from 3.2% in July. The focus this week in terms of economic data released will be UK consumer confidence on Thursday and the CBI Distributive Trades Balance tomorrow. Both of which are widely expected to show growth in the personal sector and may provide scope for the Bank of England to continue raising UK interest rates as the economy continues to show signs of growth.
There is a plethora of significant economic data released in the Euro-zone this week including the ECB interest rate announcement and press conference on Thursday where the Central Bank are widely expected to hold interest rates at 3.0% following a 0.25% increase earlier this month. However, the market will be looking at the accompanying press conference for evidence of a “vigilant” economy, a term the chairman of the Central Bank has commonly used to signal a further rise in rates the following month. There was some economic data released in the Euro-region yesterday with the three month moving average of the M3 money supply rising to 8.3% in July, which was slightly less than expected although the reading is still well above the Central Bank’s target of 4.5%. Therefore, the ECB are likely to continue raising interest rates over the coming months in order to cool borrowing and reduce inflationary pressures. There has already been some significant data released in Germany this morning with Consumer Confidence rising to the highest level in almost five-years as the prospect of a sales tax increase next year has a positive effect on household spending in the last month.
The Dollar may come under increased pressure against the majors this week in light of a full calendar of economic data as the market looks for further evidence of a slowing economy. The focus this week will fall on the Nonfarm Payrolls report this Friday, which is widely expected to show that the U.S economy added a modest 125,000 jobs in August while the unemployment rate is expected to drop slightly to 4.7%. Elsewhere, the Dollar may be hampered further in light of the Personal income and expenditure report, which is the Fed’s preferred measure for U.S inflation and forecasters are anticipating a modest rise in August while the PCE Deflator may be unchanged at 0.2%. There is some significant data released this afternoon in the States with consumer confidence expected to drop to a reading 104.0 in August as higher interest rates and rising oil prices have a negative impact on consumer sentiment. In addition, this evening will see the release of the minutes from the Fed’s last policy meeting, which should provide an insight as to why the Federal Reserve elected to hold interest rates at 5.25% following a prolonged campaign of 17-consecutive rate hikes over a two-year period.
The Euro made significant gains against the Pound yesterday amid the release of the Ifo index, which showed that business confidence in Germany exceeded expectations this month, which has revived speculation that the ECB will lift interest rates twice more this year. The index fell to a reading of 105 in August, which was a smaller decline that forecast with the market anticipating a sharper fall following the collapse of the ZEW survey on investor confidence in the region. The Euro has strengthened by 8.2% against the Dollar this year alone on expectations that the ECB will outpace the Federal Reserve in raising interest rates this year. Therefore, Euro buyers would be well advised to take advantage of the current rate against the Pound with the market looking increasingly overbought, we can expect a correction to take place at some stage, particularly if the ECB decide to lift interest rates in September. However, following the collapse of the ZEW survey, it does look increasingly likely that higher taxes, rising interest rates and slowing global growth will hamper economic expansion in the fourth quarter and may prompt the Central Bank to adopt a more cautious approach to monetary tightening.
The Pound remained relatively unchanged against the Dollar yesterday, firming a further 0.1% at close although we have traded back under 1.8900 this morning. There has been a real sparse supply of economic data released in the UK but the focus this week will fall on the GDP report this morning with the revised estimate expected to confirm economic growth at 0.8% in the second quarter. However, if the report exceeds expectations with economic growth accelerating faster than anticipated, we can expect Sterling to strengthen significantly against the majors as speculation will intensify that the Bank of England may raise interest rates again in order to bring inflation back under control.
The Dollar has looked increasingly volatile this week and that trend continued yesterday following a better than expected report on U.S Durable Goods Orders, which showed that parts of the economy continue to show signs of growth. Excluding transport, capital goods orders increased by 0.5% in July, which was more than anticipated and suggests that corporate investment will help spur economic growth as the housing and consumer sectors show signs of slowing. In addition, the weekly report on jobless claims showed that the number of people out of work and claiming benefits actually fell by 1,000 in the week ending August 19th, which provides an insight into the U.S labour market as steady job gains and rising wages may encourage consumers to carry on spending. However, the Dollar came under pressure yesterday following a report on the U.S housing market as the sales of new homes mirrored the previous report earlier this week, dropping by more than forecast at 4.3% to an annual rate of 1.072 million.
The Euro has been in rapid decline this week following the release of the ZEW index for investor confidence in Germany, which fell for the seventh consecutive month and to the lowest level in 5-years in the month of August. Therefore, the Ifo index, which measures business confidence in Europe’s largest economy, will take on added significance this morning with forecasters anticipating a further drop in confidence with a reading 104.8 expected following a modest decline of 105.6 in July. Therefore, the Euro may come under pressure if the index has fallen by more than predicted but it should remain at elevated levels indicating that growth in the German economy continues to accelerate. There is a host of significant data released in the Euro-zone this morning including the Ifo index with German construction spending surging forward by the most in over 10-years in the second quarter, which will undoubtedly spur economic growth. While elsewhere, Gross Domestic Product, the value of all goods and services, expanded by 0.9% in the second quarter, which provides further evidence that growth in Europe’s largest economy will provoke a further rise in Euro-zone interest rates.
The Pound has enjoyed a decent rally against the majors this week despite the apparent lack of significant economic data released in the UK and that trend continued yesterday with Sterling strengthening by 0.2% against the Dollar and a further 0.3% versus the Euro. The positive sentiment surrounding the Pound stemmed from an unexpectedly strong CBI industrial trends survey, which showed that new orders have increased to a 20-month high in August, suggesting that production and manufacturing output continue to show signs of growth in the third quarter. The survey has highlighted renewed inflation concerns and may prompt speculation that the BoE will need to raise UK interest rates for the second time this year.
The volatility surrounding the U.S Dollar increased yesterday amid the release of a report on the sales of existing homes in the States, which provided a further indication that the Fed’s aggressive tightening of U.S interest rates has dramatically cooled the housing market. Sales of previously owned homes fell by 4.1% in July, which was far more than expected as higher mortgage rates discourage buyers, resulting in the biggest amount of unsold homes on the market in more than a decade. The Dollar declined on the release of the data as sales fell to an annual rate of 6.33 million, which represents the lowest total since January 2004. However, by the close of trading last night we had retraced much of the gains as investor’s seemed divided on whether the Federal Reserve will lift interest rates next month as house prices continue to rise despite the influx of properties on the market. There is a host of significant economic data released in the States this afternoon with Durable Goods Orders widely expected to increase by 0.2% in July while elsewhere, a further report on the U.S housing market may show that sales of new homes slumped to an annual rate of 1.11 million following a modest drop in June.
Data Released 24th August
GER 10:00 IFO Index (August)
U.S 13:30 Durable Goods Orders (July) U.S 13:00 Initial Jobless Claims (w/e 19th August) U.S 15:00 New Home Sales (July)
The Euro came under sustained pressure yesterday, dropping by a further 0.4% against the Pound and falling from a two-week high versus the Dollar. The negative sentiment surrounding the Euro can be attributed to a report from the ZEW centre of economic research, which showed that German investor confidence dropped to lowest level in over 5-years in August, primarily due to a sharp rise in borrowing costs and next year’s VAT rise in Germany, which threatens to undermine growth. The ZEW index dropped significantly from a reading of 15.1 in July to 5.6 this month and this is the seventh consecutive fall, which emphasis that business confidence may be severely muted over the coming months as oil prices continue to rise while Euro-zone interest rates are poised to increase further from the current 3.0%. As a result, the Euro declined by 0.6% against the Dollar and we closed well above 1.4700 versus the Pound last night. However, the European Central Bank are still widely expected to raise Euro-zone interest rates in the next month as inflation continues to accelerate almost half a percentage point above the Bank’s target. Therefore, we can still expect the Euro to make gains over the coming months and Euro buyers would be well advised to take advantage of the current rate.
The Pound has been in rapid decline over the past week, due to a string of poor economic data, which has undermined expectations that the Bank of England will enter a new cycle of interest rate rises. However, Sterling was given a reprieve yesterday, particularly against the Euro, following a disappointing report on investor confidence in Germany. There is a sparse supply of fundamental UK data released this week but the focus this morning will fall on the CBI Industrial Trends survey for August with forecasters anticipating a modest drop in business expectations and new orders this month. The Pound also received a boost from comments from the ECB council member Axel Weber who hinted at the reallocation of Germany’s reserves from gold into foreign currencies with Sterling a realistic candidate for inclusion in their foreign exchange reserves.
The Dollar has remained relatively unchanged in the past 24hrs due to a sparse supply of U.S data released, although we have seen some upside movement versus the Euro and the Japanese Yen. U.S economic growth seems to be moderating according to the recent surveys on consumer and business sentiment, which has dramatically shifted expectations that the Fed will not raise interest rates again this year. Therefore, the report on the U.S housing market this afternoon will take on added significance with forecasters anticipating a further a drop in the sales of existing homes in the last month with the annual rate falling to $6.50 million. The collapse in the U.S housing market this year can be attributed to significantly higher interest rates as the Fed’s two year campaign has seen rates peak at 5.25%, which makes mortgages far more unattractive for first time buyers.
The Pound made significant gains against the majors yesterday, firming 0.8% versus the U.S Dollar and a further 0.3% against the Euro after slumping to a two week low in the midst of some poor economic data, which has severely muted claims that the Bank of England will enter a sustained period of monetary tightening. There is a sparse supply of fundamental news flow this week both in Europe and the UK but the Pound shrugged off some poor housing data yesterday to close around 1.4700 versus the Euro. The Rightmove House Price indicator unexpectedly declined 1.6% this month from 2.9% in July while the annual rate fell towards 9.0%. The survey suggested that the apparent slowdown in the housing market was a result of seasonal factors but also indicated that prices may of peaked for 2006 as buyers become concerned with increased borrowing costs leading to higher mortgage rates. The key economic data released this week in the UK will be the CBI industrial trends survey tomorrow and the second quarter GDP report due out on Friday, both of which are expected to show that economic growth has continued to accelerate in the second quarter.
The Euro has made significant gains in the past week as speculation intensifies that the ECB will increase the pace of monetary tightening in the Euro-zone as economic growth continues to accelerate from the six-year high in the second quarter. Therefore, the Euro-zone economy is seen as growing at a pace that would sustain a further two rate rises this year and we can therefore expect the Euro to make further gains against the majors over the coming months. However, there is some significant data released in the Euro-zone this morning with German investor confidence widely expected to fall to the lowest level in almost four years on concerns that higher interest rates will hamper economic expansion in Europe’s largest economy. The ZEW survey for investor confidence may have dropped to a reading of 11.4 in August, which is the lowest level since December 2002. The Euro may come under further pressure if Industrial activity in the Euro-zone has increased by less than anticipated with orders expected to increase by upto 0.4% in June.
The U.S Dollar suffered sharp losses against the majors yesterday despite an apparent lack of any fundamental data released in the States but the negative sentiment surrounding the Dollar can be attributed to a delayed reaction to a string of poor economic data in the last week. As a result, U.S interest rates expectations have been severely muted for the coming months as inflation moderates while economic growth continues to show signs of slowing into the third quarter. In addition, Industrial Production and manufacturing output has also come in weaker than expected in the past month while rising petrol prices and significantly higher interest rates are beginning to weigh heavily on consumer sentiment. The Dollar declined by 0.7% against the Euro yesterday, dropping to an 11-week low at 1.2900 and with a distinct lack of economic data released until Wednesday with existing home sales, we can expect the Dollar to remain fairly muted against both Sterling and the Euro.
Following on from last week, the Dollar has come under increased pressure amid the release of the University of Michigan’s Preliminary index for U.S consumer sentiment on Friday, which showed that confidence unexpectedly dropped in July despite significantly higher petrol prices. The index fell to a reading of 78.7 last month, which was well below forecasts and the lowest level since October last year. The Dollar weakened against the Pound and the Euro as speculation continues to gather momentum that the Federal Reserve have finished their two-year campaign in raising U.S interest rates and will again look to hold at 5.25% next month. Last week, several indices indicated that economic growth in the States will moderate in the third quarter while inflation looks to have peaked, which provides the clearest indication yet that the Fed won’t need to continue raising rate beyond the current level. The Dollar has declined against the Euro this morning on the assumption that higher interest rates are having a negative impact on economic activity and in the data released this week, the U.S housing market may continue to show signs of cooling as we approach a two-year low on home sales while elsewhere, durable goods orders are widely expected to drop by upto 0.5% in July.
The Euro has rebounded sharply against the Pound in the last week as we continue to trade down from the year high at 1.4850 as economic growth in the Euro region accelerates to a six year high last month while the annual inflation rate also looks to be increasing, which should prompt the ECB to lift interest rates beyond the current 3.0%. However, the Euro may come under pressure this week on the news that German business and investor confidence fell in the surveys for August while the Provisional estimate for GDP in the second quarter may show that growth in Europe’s largest economy continues to expand. The Ifo Index, which analyses business confidence in Germany, is widely expected to show further signs of cooling in August after reaching a 15-year high in June. Elsewhere, the ZEW survey for economic sentiment may show signs of robust growth in July following an unexpected drop the previous month.
The Pound has rallied furiously since the Bank of England unexpectedly decided to lift UK interest rates this month but following a week of soft economic data, expectations have dramatically shifted on whether the BoE will enter a sustained cycle of monetary tightening. Factory-gate and High street inflation showed signs of moderating in July, dropping towards an annual rate of 2.4% while UK unemployment surged to a six year high will the number of people out of work jumping by 3,000 on the month. In addition, the minutes from the BoE’s last policy meeting seemed to suggest that this months decision to raise rates was merely a measure to contain inflation and the language used was particularly negative in relation to a further tightening of rates in the coming months. There is a sparse supply of economic factors that could potentially drive the Pound this week with the CBI industrial trends survey released tomorrow and the general consensus is for a modest drop in business expectations and growth in new orders. The focus this week will fall on UK GDP data in the second quarter after the initial estimate showed economic growth at 0.8% while elsewhere, Consumer spending is widely expected to increase by 0.7% in July, which would be in stark contrast to the drop in retail sales we saw last week.
The Pound has come under increased pressure towards the latter part of this week and fell a further 0.3% versus the Euro yesterday, to close under 1.4700 for the first time in nearly a month. Therefore, Euro buyers would be well advised to take advantage of the current market rate because as speculation continues to grow that the BoE will not enter a sustained cycle of monetary tightening, we can expect the Euro to make further gains. Since the Bank of England decided to lift interest rates for the first time in 14-months, there has been a string of poor economic data that hasn’t supported a further rate rise over the coming months. This week, Factory-gate and high street inflation has showed signs of moderating in July while UK unemployment has hit a six-year high with the number of people out of work jumping by 3,000 on the month. The negative sentiment surrounding the Pound continued yesterday as UK Retail Sales fell for the first time in six months in July with sales dropping 0.3%. Consumer Spending represents two thirds of the UK economy and the recent rise in confidence would of been one of the primary reasons for the Bank of England to lift interest rates this month. Sterling may decline further against the majors this morning on the release of PSNCR index, which records the amount of money the government has to borrow to meet its expenditure.
The Euro made significant gains against the Pound yesterday despite a host a soft economic data, which has provoked suspicion that the ECB won’t be as aggressive towards monetary tightening as previously thought. Economic growth in the Euro-zone hit a six year high in the second quarter but the inflation data yesterday showed that the Harmonised Index of consumer prices fell 0.1% in July to take the annual inflation rate down to 2.4%, which was slightly under forecasts of 2.5%. In addition, Euro-zone Industrial Production came in weaker than expected for the month of June, dropping 0.1% versus expectations that output would remain unchanged from May. The Euro may make further gains this morning if the EU Trade Balance shows that the deficit in goods and services unexpectedly narrowed in June.
The Dollar also made gains against the Pound yesterday, firming 0.2% to open this morning under 1.8900. Following a weaker than expected report of U.S leading economic indicators, the Dollar bounced back in the wake of the Philadelphia Fed Index, which analyses growth in manufacturing in the region. The index was widely expected to show a reading slightly above 6.0 in August but according to the Federal Reserve Bank in Philadelphia, the region’s manufacturing sector expanded to a reading of 18.5 this month led by a sharp rise in new orders and shipment components. The Dollar has been under increased pressure of late as economic growth looks to moderate in the States while inflation seems to be slowing following the Fed’s prolonged campaign in lifting interest rates 17-months in succession. There is some significant data released this afternoon with U.S consumer confidence widely expected to decline further in August for the fourth in five as the housing market continues to show signs of cooling while higher petrol prices are weighing on consumer sentiment.
The Pound dropped 0.2% against the Euro yesterday to close well under 1.4800 following the release of the minutes from the MPC’s last interest rate announcement where policy makers elected to raise UK interest rates for the first time in 14-months. The committee voted 6-1 in favour of lifting rates in August with the market anticipating a unanimous decision and the minutes also indicated that the Bank of England would not enter a new cycle of monetary tightening as was widely expected. UK inflation has moderated slightly to 2.4% in the last month, which is still well above the government’s comfort zone and therefore fuelled speculation that a further rate increase was needed. However, the language used in the accompanying statement yesterday indicated that policy makers would be prepared to reverse the decision to hike rates in August and the move would lessen the need for more aggressive action later. The Pound came under further pressure when a report on UK unemployment showed that the number of people out of work increased by 2,000 in July to 957,000, the most since January 2002, while UK average earnings increased by more than expected as consumers demand higher wages to cope with rising energy costs. The focus today in terms of economic data released will be UK retail sales for July and forecasters are anticipating a further increase of 0.2% from June.
The Euro made gains against the majors yesterday despite a sparse supply of economic factors driving the single currency. Instead, the Euro reacted to some soft inflation data in the States to climb 0.6% versus the Dollar, while also firming against the Pound amid the release of the minutes from the Bank of England. There is some significant data released this morning in the Euro-zone with the Harmonised Index of Consumer Prices (HICP) widely expected to confirm an annual inflation rate of 2.5% in the Euro region. Elsewhere, the Euro may come under pressure with Industrial Production data expected to show that activity dropped by 0.1% in June.
The Dollar slipped against the Euro and the Pound yesterday as we briefly traded back above 1.9000 for the first time this week. The weakness came from a softer than expected inflation report, which showed that prices charged for U.S consumer products increased by the smallest amount since February this year. Core prices, which excludes food and energy, only increased by 0.2% from June and it looks increasingly likely that U.S interest rates have now peaked at the current 5.25%. With inflation moderating and economic growth seemingly slowing in the third quarter, the market has factored in a less than 50 per cent chance that the Fed will raise U.S interest rates again this year. The Dollar came under further pressure yesterday after a report showed that industrial production had unexpectedly declined in the figures for July, while elsewhere, Housing starts dropped to the lowest level in nearly two years to an annual rate of 1.795 million as higher mortgage rates discouraged first time buyers. The focus in terms of data released will fall on the Philly Fed Index, which analyses manufacturing conditions in the Philadelphia region and forecasters are anticipating a stung reading for July.
Data Released 17th August
UK 09:30 Retail Sales (July)
EU 10:00 HICP (July) EU 10:00 Industrial Production (June)
U.S 13:30 Initial Jobless Claims (w/e 12th August) U.S 15:00 Leading Indicators (July) U.S 17:00 Philly Fed Index (August)
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