Daily Brief

Still guardedly upbeat

Unwanted at the moment

Although there was nothing dramatic about it, the USD and JPY were in the back half of the field again on Wednesday, in line with their recent pattern of weakness. Over the last month the two were the biggest losers, falling by an average of 2.2% against the major currencies.

Both are adversely affected by the broadly positive mood among investors, who are chasing returns wherever they find them as a result of global stimulus measures and unprecedentedly low interest rates. With the exception of gold, which is currently putting in a gravity-defying performance not unlike Tesla (which is now worth more than Toyota, VAG and Hyundai combined), safe-havens have no takers at the moment.

The yen did itself no favours on Wednesday morning with the provisional purchasing managers’ index for the manufacturing sector coming in at 42.6 and showing that the “downturn remains substantial”. The US data for existing home sales showed a record 20.7% increase in June that still left them 18% down from February’s level.


Confidence and central banks

Soft data released overnight showed business confidence deteriorating in Australia while German consumers grew more confident – or at least less nervous. Coming up later today are confidence measures for French manufacturers, Turkish and Euroland consumers and South African businesses. The Turkish and South African central banks will both make monetary policy announcements.

The Central Bank of Turkey is first up, and is expected to leave its 8.25% repo rate unchanged. After lunch the consensus is that the South African Reserve Bank will lower its repo rate by a quarter of a percentage point to a record low of 3.5%. April’s 12% fall in retail sales would appear to justify such a move.

Today’s other agenda items are more interesting than compelling. The CBI’s Industrial Trends Survey is expected to paint a less dismal picture of UK manufacturers’ order books. Weekly US jobless claims are likely to exceed a million for an 18th week. Euroland consumer confidence is expected to improve by a couple of points to a provisional -12.


Provisional PMIs

The main theme on Friday will be the provisional PMIs from Australia, Europe and the United States. The day begins with the Australian readings, expected to be positive for both manufacturing and services. June’s retail sales data will be important for sterling.

Analysts reckon UK retail sales grew by 8% in June following May’s 12% rebound, but will still be down by 13.1% compared with the same month last year. At the same time, consumer confidence is forecast to continue bumping along the bottom at -27. Britain’s provisional PMIs are estimated at 51.5 for services and 52 for manufacturing.

The equivalent readings for pan-Euroland are forecast to be 51 and 50 with the United States at 51 and 51.5. Also out on Friday is US new home sales, a more useful economic indicator than existing home sales because they involve builders building them rather than them just changing hands in the secondary market.

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