Business News: Daily Financial Market Outlook

Tuesday, July 15, 2008

Daily Financial Market Outlook

Share this history on :

Daily Forex Fundamentals | Written by Lloyds TSB | Jul 15 08 07:08 GMT |

Overview & economic commentary

The British Retail Consortium earlier this morning reported a 0.4% drop in annual like-for-like sales in June. This was down from a 1.9% rise in May and suggests we could see some decline in sales from last month's official 3.5% surge. Consumer prices are due at 9.30 and are forecast to have extended their uptrend in June. We have pencilled in a rise to 3.6% from 3.3% in May, but stronger than forecast PPI data yesterday suggest that an even loftier CPI number can't be ruled out. BoE governor King, in the margin of the Bank's annual report yesterday, warned that CPI will stay above 3.0% 'until well into next year'. This scenario does not in our view lend itself to a reduction in base rates. In the euro zone, the German ZEW survey is forecast to have dropped, possibly sharply, in July as survey respondents take into account weak German industry data, the inflation backdrop and the sell-off in equity markets.
We forecast a drop to -57.0. Producer prices and retail sales are due in the US, but it will be Fed chairman Bernanke's testimony on the economy that will take centre stage this afternoon as markets wonder whether the Fed believes the economy is on track to recover in the second half of the year. The unemployment rate was forecast back in April to peak at 5.7% this year, but unless the stronger gdp growth profile for Q2 is sustained in Q3 and Q4 and oil prices fall, the risk is that unemployment could peak closer to 6.0%. This could lead markets to completely abandon speculation of a first rate hike this year, a view we have held for quite a while.

Currency commentary

Volatile markets are expected today as participants prepare to digest a deluge of economic data and mull over Fed chairman Bernanke's testimony. Sterling had a good session yesterday, supported by stronger PPI data and could again draw some strength from CPI data this morning. Sterling took weak housing data from the RICS and a disappointing retail sales survey from the BRC in its stride o/n, with £/$ hovering above 1.9950 and €/£ steady around 0.7975. A UK CPI number stronger than the 3.6% consensus could bolster sterling momentum ahead of US retail sales and PPI. US retail sales are forecast to be positive for June and a stronger outcome, supported by the tax rebate, could briefly help the dollar to rally. €/$ in particular could be a mover depending on the German ZEW data at 10am. A rise to 1.60 is still on the cards after yesterday's close above 1.59. The A$ continues to be well bid this morning after Asian stocks shadowed US markets higher. The rate decision in Canada may impact C$ crosses at 2pm.

Major data and events today

UK BRC retail sales monitor (Jun) (00:01)
UK RICS house price survey (00:01)
May -92.2
Jun (actual) -88.0
UK Consumer prices index (nsa)
Ma y +0.6% Y-O-Y +3.3%
Jun (f'cast) +0.4% Y-O-Y +3.6%
Median +0.4% Range +0.1%+0.6%
UK Retail prices index (nsa)
Ma y +0.5% Y-O-Y +4.3%
Jun (f'cast) +0.3% Y-O-Y +4.1%
Median +0.5% Range +0.2%:+0.7%
UK RPI ex-mortgage interest payments (nsa)
Ma y +0.7% Y-O-Y +4.4%
Jun (f'cast) +0.4% Y-O-Y +4.4%
Median +0.4% Range +0.1%:+0.6%
German ZEW survey (10:00)
Jun -52.4
Jul (f'cast) -57.0
Median -55.0 Range -64.0:-48.0
US Producer prices (sa, prov) (13:30)
May +1.4% Y-O-Y +7.2%
Jun (f'cast) +1.4% Y-O-Y +8.6%
Median +1.3% Range +0.5%:+2.4%
US PPI, core (sa, prov) (13:30)
May +0.2% Y-O-Y +3.0%
Jun (f'cast) +0.3% Y-O-Y +3.2%
Median +0.3% Range +0.1%:+0.4%
US Retail sales (advance) (13:30)
May +1.0% Y-O-Y +3.0%
Jun (f'cast) +0.4% Y-O-Y +3.9%
Median +0.3% Range -0.4%:+1.1%
US Retail sales, ex-autos (13:30)
May +1.2% Y-O-Y +6.1%
Jun (f'cast) +0.4% Y-O-Y +5.5%
Median +0.9% Range zero:+1.6%
US Empire manuf. survey (13:30)
Jun -8.7%
Jul (f'cast) -7.5%
Median -7.3% Range -15.0%:-0.1%
US Business inventories (15:00)
Apr +0.5%
May (f'cast) +0.5%
Median +0.5% Range +0.3%:+0.6%
Canada interest rate decision (14:00)
Current: 3.00%
Forecast: 3.00%
US Fed Chairman Bernanke gives semi-annual Monetary Policy testimony to Congress (15:00)