Morning Report: 3 July 2017

3rd July 2017 By: Ranko Berich

GBP After several weeks of low volatility, G10 currencies were on the move last week as markets readjusted assumptions about central bank policy, allowing sterling to strengthen against the beleaguered US dollar. This morning at 09:30 BST monthly Manufacturing Purchasing Managers Index data will be released, and is likely to show a strong level of activity in the sector. At 18:30 Bank of England Chief Economist Andy Haldane will speak, after giving incendiary speech last month saying he is was warming up to the idea of rate hikes. Later in the week PMI surveys for Construction and Services will be released on Wednesday and Thursday, and “hard” data in the form of Industrial Output will be released on Friday.

EUR The euro was another major benefactor of last week’s turmoil in bond markets, and appreciated significantly against USD, have been trapped in a tight range for the preceding weeks. Friday’s data included revised eurozone inflation for June, which showed the Core Consumer Price Index up 1.1%, compared to 0.9% previously. This will be a busy week for the euro data calendar, with rafts of mid-tier data released today and on Wednesday. Today’s releases have included European Manufacturing Purchasing Managers’ Indices, where the region’s overall indicator was in line with expectations. Eurozone Unemployment will be released at 10:00 BST.

USD USD was solidly on the back foot last week, as markets revised expectations of global interest rates upwards, leaving the greenback behind in relative terms. Friday’s biggest release was the Core Personal Consumption Expenditures Price Index, the Federal Reserve’s favoured measure of inflation. Year on year growth in the index slowed to 1.4% from 1.5% previously, in line with expectations. Today at 14:45 BST and 15:00 Manufacturing Purchasing Managers Indices will be released by Markit and ISM respectively, the latter accompanied by Construction Spending. Later in the week, the Federal Reserve’s latest meeting minutes will be out on Wednesday, followed by monthly non-farm payrolls on Friday.

CAD The loonie also took advantage of last week’s USD weakness, although price action was rather flat on Thursday and Friday compared to earlier in the week. Monthly Canadian Gross Domestic Product growth was 0.2% in April, with 14 out of the 20 sectors in the report growing. Today is Canada Day, meaning the loonie data calendar will start with tomorrow’s Manufacturing Purchasing Managers Index release.

UK news

  • FT: Investment in UK car industry plummets amid Brexit uncertainty. Total investment on track to be less than half of the spending recorded last year. Investment in the UK car industry has fallen to just £322m in the first half of 2017, in a sign that companies are delaying or cancelling spending ahead of the UK leaving the EU. Last year £1.66bn was invested in the auto sector, more than 30 per cent down from £2.5bn in 2015, as carmakers and their suppliers delayed non-essential investment following the EU referendum last June. But investment looks to have fallen even further in the first six months of this year, according to figures compiled by the Society of Motor Manufacturers and Traders industry body.
  • Reuters: Euro zone factories round off first half of 2017 on six-year high – PMI. Factories across the euro zone rounded off the first half of 2017 by ramping up activity at the fastest rate for over six years as rising prices failed to put a dent in orders, a survey showed on Monday. IHS Markit’s Manufacturing Purchasing Managers’ Index for the euro zone rose to 57.4 in June, up from May’s 57.0 and pipping the preliminary reading of 57.3. June’s reading was the highest since April 2011 and was comfortably above the 50 level that separates growth from contraction.