Good morning,
Waiting for a sign
While larger macroeconomic forces are at play in the background and with the US jobs number behind us and the testimony of Fed Chair Janet Yellen beginning tomorrow, there is a lot for traders to chew over but little for them to act upon. Hence today is likely to be rather dull.
UK High St tighter before BOE speeches
News from the UK yesterday focused on the High St with the British Retail Consortium’s latest sales readout showing a 1.2% increase with rising food prices the main cause of increased purchasing while the credit card company Visa said that Briton’s spending on their cards was up 2.5% on the year in June, down from 3.5% in the rest of Q2. Margins are being tightened across the retail sector but we will have to wait a few more weeks for the earnings season to show just how hard the stalwarts of the British consumer landscape are being hit.
Sterling was quiet yesterday but while the data calendar is quiet for the UK, speeches by BOE Deputy Governor and Chief Economist Ben Broadbent and Andy Haldane may rock the apple cart given the increased chatter of late that the Bank of England could and should raise interest rates by the end of year. Broadbent – who is expected to be a centrist on policy speaks at noon – following Haldane who has made noises about rate hikes who will speak at 10am.
ECB and Fed policymakers also due to speak
Similarly, the main things to watch for both the euro and the USD today are speeches by members of the European Central Bank and the Federal Reserve later on today. ECB member and head of the Banque De France Benoit Coeure speaks in Frankfurt at 1pm with the Fed’s Lael Brainard speaking at 5.30pm in New York.
The latter is probably the more important given Brainard is giving the keynote address on “Normalizing Central Banks’ Balance Sheets” and the focus that the market put on the USD following the minutes of the latest Federal Reserve meeting that hinted at additional policy tightening but not until the end of the year.
Elsewhere, AUD rose on the back of a rocketing level of business confidence with the overall sentiment index rising to the highest since 2008. The issue remains however that as much as Australians are optimistic about things, that is not translating into the real economy. GDP in Q1 was at a post-Global Financial Crisis nadir but confidence is booming.
Have a great day
Jeremy Cook, Chief Economist