Morning Report: 5 July 2017

5th July 2017 By: Ranko Berich

GBP Yesterday’s Fourth of July holiday in the US made for a quiet session, and sterling traded flat against USD and EUR, only breaking lower versus the single currency this morning. The Construction Purchasing Managers’ Index fell to 54.8 from 56.0, reflecting a slightly lower rate of reported activity growth in the sector. The British Retail Consortium’s Shop Price Index was released this morning, and remained in negative price growth of 0.3% year on year, despite soaring prices in some sectors. The year on year contraction nonetheless remains far less pronounced than earlier in the year. Today at 09:30 BST the latest Services PMI figures will be released.

EUR The euro also traded within its recent range yesterday against both sterling and USD. Spanish Unemployment fell by 98,300, bringing overall Unemployment to an 8 year low, while producer prices in the eurozone as a whole dropped 0.4%, suggesting that some of the recent inflationary surge seen in headline Consumer Price Index data may be dissipating. This morning’s data has included Services Purchasing Managers Indices, which showed the highest reading for the Spanish services sector since September 2015. At 10:00 BST eurozone wide Retail Sales figures will be released.

USD The US dollar saw little movement overnight, despite increasing geopolitical tensions after North Korea successfully tested an intercontinental ballistic missile which has the potential to reach the US mainland. North Korean leader Kim Jong Un’s decision to test the weapon on US Independence Day was intentionally provocative, and was reiterated by an inflammatory speech accompanying the test which criticised the US. Regarding macro data, the latest FOMC meeting minutes will be released today at 18.00 BST. The minutes will be scrutinized looking after hints regarding the future of the Fed’s balance sheet and rate hike path.

CAD The loonie got yet another boost yesterday after Stephen Poloz, Bank of Canada’s Governor, made further hawkish comments, hinting that the central bank could be on the verge of rising overnight interest rates from the current 0.5%. CAD has strengthened over the last six consecutive sessions, ignoring a slight slowdown in the manufacturing PMI which was released yesterday.