Daily Brief

Warming up

3 minute read

Summer holiday

Although July is still two days away and August is barely visible on the radar, there is a distinct summer-holiday atmosphere in the FX market. Monday’s safe haven winners, the USD and JPY, added an average of 0.3% while the NZD at the rear was only 0.3% worse off.

That is not to say there was no movement at all. Sterling was in demand ahead of London’s opening before it dropped back. After covering a range of three quarters of a US cent, the pound came away with a net quarter-cent loss. It was unchanged on average and flat against the euro, the franc and the Canadian dollar.

The pound had nothing to say for itself on Monday. Since the MPC announcement last week the Bank of England has been silent on monetary policy. It did publish a paper yesterday about the transition from LIBOR to SONIA interest reference rates but it was very much an administrative exercise. Likewise, the bank’s website suggests that tomorrow’s speech by Chief Economist Andy Haldane will be the first in more than a month to focus on monetary policy.


Swedish shops and the Dallas Fed

Two sets of data appeared during Monday’s London session; Swedish retail sales and the Dallas Federal Reserve’s manufacturing index. There were speeches from the ECB and the Fed.

Scandinavian shopkeepers clearly had a better time in May than many of their colleagues elsewhere. Following the earlier report that Norwegian retail sales increased by 5.8% in May, Sweden followed with news that sales there went up by a monthly 2.3% and were 10.3% above the same month last year. The increase was led by durable goods, including shoes, while sales of consumables were fractionally lower on the month.

At 31.1 the Dallas Fed’s manufacturing index for June was towards the top of its range over the last decade, and well above its 2.8 series average, even though it was four points down from May. “Perceptions of broader business conditions improved markedly in June”. However, the Fed noted that “price and wage pressures accelerated further”, with the raw materials price index, the finished goods price index and the wages and benefits index all setting record highs.


Housing and confidence

On both sides of the Atlantic, house prices and consumer confidence are in the spotlight today. Nationwide opened the batting with a report that the 13.5% annual rise in house prices was the biggest since 2004.

This afternoon Standard and Poors and the Federal Housing Finance Agency will publish their measures of US house price inflation. The S&P version is expected to come in at 14.5%, which would be another long-term high. On the consumer confidence front there are readings from Spain, the Eurozone, Germany and the United States.

The Bank of England’s consumer credit report this morning will include mortgage approvals for May. They are likely to be lower on the month, given the imminent end of the chancellor’s stamp duty holiday. European Central Bank President Christine Lagarde will address the Brussels Economic Forum in mid-afternoon.


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