Sterling pares recent gains after mediocre credit figures, amongst otherwise quiet day

Tom Tong30/Jul/2013Currency Updates

USD

The dollar rebounded from a five-week low against a basket of currencies on Monday as investors positioned themselves ahead of a key week of economic data out of the U.S, eurozone, and British Central Bank policy meetings. The greenback, which has been sold off in recent weeks, recovered slightly while US stocks fell as the market waits to react to this data.

We await the Fed’s statement on Wednesday for updated news regarding the timetable for winding down its bond buying programme but tomorrow will also see the first reading of the second-quarter GDP data with a Reuters poll forecasting one percent growth. On Friday, the US monthly payrolls will be released, with forecast for 185,000 jobs in July.

A relatively quiet day for data today with the main focus being U.S consumer confidence for July released later this afternoon. The market’s real focus will be on tomorrow.

GBP

Sterling peaked early in the morning yesterday against its most traded counterparts, only to decline slowly throughout the day after some negative credit themed data releases. Mortgage approvals are down on the previous month’s figures, when the consensus was that we would see an improvement. Net lending followed suit, posting a figure lower than the consensus; however it did show an improvement on last month’s figures of 0.5BN up to 1BN, and consumer credit showed much of the same, coming out as below the previous month’s figures, at 0.5BN. This data could be showing a reduction in the UK’s access to credit, and the health of the UK economy, hence the slow downturn in sterling yesterday.

Today is a very quiet day for sterling, with the only notable data release being the GFK Group’s consumer confidence figures for July. The consensus is an improvement on last month’s figures. Consumer confidence is an important statistic, and if the figure continues to show up negative, it can only spell a worsening of the economy in the UK.

EUR

According to a Sentix reported released yesterday, less than a quarter of eurozone businesses expect a country to leave the Currency union in the next 12 months. Only 23.75% of firms polled suggested that a country’s exit was imminent whereas 73% did at the same time last year. This shows a boost in overall business confidence in the structure of the single currency zone. This was partly helped by Mario Draghi’s comments on his view that saving the integrity of the eurozone was his utmost priority.

Today in the eurozone we have a number of data points; some from the area as a whole and some from specific member states. Eurozone Consumer Confidence for July will be released this morning. It is forecast to be 1.4 points better than last showing a growth in the public trust in the area. Along with this we have Business climate and economic sentiment indicator as tier 3 points.

Germany will release the Consumer Price Index and Harmonized Consumer Price Index figures at midday today. This measure shows the change in price of a market basket of goods and is a measure of general inflation in an economy. The German CPI is forecast to drop from 1.9% to 1.8%

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Written by Tom Tong

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