Daily Financial Market Outlook

Daily Forex Fundamentals | Written by Lloyds TSB | Jun 30 09 06:55 GMT |

Overview & economic commentary It's a busy day for data, with key releases in the US and euro zone. Ahead of tomorrow's ISM manufacturing report, the markets will be watching today's June Chicago PMI. Given the rise in the latest Philly Fed index, and the recent back-to-back increases in durable goods orders, the Chicago survey is expected to post a further improvement. There is likely to be particular interest in the survey's employment component ahead of Thursday's payroll report. Alongside the Chicago PMI, US consumer confidence and house price data are also due. Over the past month, the University of Michigan sentiment survey has improved, while the weekly ABC consumer comfort polls have trended lower. With equity markets firmer, and talk of recovery more widespread, we believe the former is more representative of underlying conditions. However, while the Conference Board report is likely to be stronger, the overhang of unsold homes suggests US house prices made little progress in April. Elsewhere, inflation and money supply figures dominate a crowded euro zone calendar. The annual CPI is forecast to have dropped into negative territory (-0.2%yoy) for the first time since the euro's inception. Annual euro zone M3 growth, meanwhile, is predicted to have slowed in May reflecting, in part, a move out of bank deposits into stronger-performing equities. Finally, in the UK, the final estimate of Q1 GDP, business investment and the Q1 current account figures are due. Given the downward revision to construction output, Q1 GDP is expected to be revised down to a fall of 2.2% compared with -1.9% previously. Currency commentary £/$ broke through 1.67 in early trade following the Nationwide report of a 0.9% jump in UK house prices in June. The increase is the 3rd in 4 months but is at odds with the still very subdued transaction and lending volume data released in recent days. Sterling managed to shrug off data from the BoE showing that overseas investors stepped up selling of gilts/bills in May. Final UK Q1 GDP data at 9.30 should not have a major impact and any profit taking on the back of a downward revision could trigger fresh sterling buying. Key resistance now runs along 1.6790. €/£ is offered around 0.8450 and £/Chf is bid above 1.80. MPC member Tucker speaks at 10:30. Euro zone annual CPI may have registered a negative result in June data at 10:00 may show, but considering the negative momentum vis-a-vis the dollar - €/$ is bid above 1.4150 - we doubt that a weaker CPI result could cause participants to sell euro crosses. EM currencies in Asia and eastern Europe are also finding good upward traction as Asian equities rally. €/Huf has broken below 275.0 while $/zloty hit an o/n low of 3.1551 Major data and events today UK Consumer confidence (GfK) (00:01) May -27 Jun (actual) -25 German retail sales (07:00) (30/6 - 5/7) Apr +0.5% Y-O-Y -0.8% May (f'cast) -0.3% Y-O-Y -2.6% Median zero Range -1.0%:+0.5% French producer prices (07:45) Apr -0.9% Y-O-Y -6.4% May (f'cast) +0.4% Y-O-Y -7.1% Median -0.2% Range -0.9%:+0.5% German unemployment (sa) (08.55) May +1K Rate 8.2% Jun (f'cast) +40K Rate 8.3% Median +45K Rate +6K:+70K EU-16 money supply, M3 (sa) (09:00) Apr Y-O-Y +4.9% May (f'cast) Y-O-Y +4.5% Median +4.6% Range +3.9%:+4.8% EU-16 CPI (10:00) (flash) May Y-O-Y zero Jun (f'cast) Y-O-Y -0.2% Median -0.3% Range -0.3%:zero Range 0.40%:0.47% UK GDP (final) Q1 (2nd estimate) -1.9% Y-O-Y -4.1% Q1 (f'cast) -2.2% Y-O-Y -4.4% Median -2.1% Range -2.2%:-1.9% UK Current account Q4 -£7.6bn Q1 (f'cast) -£6.7bn Median -£6.7bn Range -£8.1bn:-£4.1bn UK Business investment (final) Q1 (prel) -5.5% Y-O-Y -6.8% Q1 (f'cast) -5.5% Y-O-Y -6.8% Median -5.5% Range -5.8%:-5.5% Range -0.7%:+5.0% Canada GDP, monthly (13:30) Mar -0.3% Apr (f'cast) -0.1% Median -0.1% Range -0.4%:+0.1% US House prices (S&P/CaseShiller)(Apr)(14:00) Mar Y-O-Y -18.7% US Chicago PMI (14:45) May 34.9 Jun (f'cast) 38.5 Median 39.0 Range 34.0:44.0 US Consumer confidence (15:00) May 54.9 Jun (f'cast) 55.2 Median 55.1 Range 51.7:58.0 ECB member Nowotny speaks in Vienna (10:00) BoE member Tucker speaks in London (10:30) US Fed member Bullard speaks in Philadelphia (17:00) US Fed member Hoenig speaks in New York (21:00) Lloyds TSB Bank http://www.lloydstsbfinancialmarkets.com Disclaimer: Any documentation, reports, correspondence or other material or information in whatever form be it electronic, textual or otherwise is based on sources believed to be reliable, however neither the Bank nor its directors, officers or employees warrant accuracy, completeness or otherwise, or accept responsibility for any error, omission or other inaccuracy, or for any consequences arising from any reliance upon such information. 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