British Pound Poised to Extend Gains as Jobless Rate Hits 15-Month Low
Key Overnight Developments
• New Zealand Retail Sales Underperform, House Sales Fall Most Since Jan’09
• Aussie Down on GDP Outlook Downgrade Despite Consumer Confidence Gain
The Euro slipped 0.1 percent in overnight trade, pulling back as markets digested NY-session gains. The British Pound added 0.3 percent ahead of June’s employment report (see below). We remain flat EURUSD and GBPUSD.
Asia Session Highlights
Major currencies consolidated in overnight trade as a mixed batch of economic news countered cues from buoyant stock performance. The MSCI Asia Pacific regional benchmark index surged 1.6 percent, with technology shares leading exchanges higher after Intel posted the best quarterly performance on record.
New Zealand’s Core Retail Sales – adjusted to exclude volatile auto-related purchases, particularly fuel – slumped 0.2 percent in June, disappointing expectations calling for a 0.6 percent increase and marking the second consecutive decline. A separate report from REINZ showed House Sales fell 24.3 percent from the previous year, the most since January 2009.
Australian Consumer Confidence jumped 11.1 percent – the most in 13 months – according to a report from the Westpac Banking Group, but this seemed to be largely overlooked after the government revised down its 2010-11 economic growth forecast to 3 percent, down from 3.25 percent reported in May. The sharp jump in sentiment may owe to the ouster of increasingly unpopular Prime Minister Kevin Rudd and his replacement with Julia Gillard.
Euro Session: What to Expect
UK unemployment data headlines the economic calendar in European hours, with Jobless Claims expected to decline 20,000 in June as the jobless rate drops to 4.5 percent – the lowest in 15 months. The British Pound has been the top performer this week ahead of the release, with economic data taking on added significance while the markets wait for greater clarity on monetary policy with next week’s release of the minutes from July’s Bank of England meeting.
The rate decision, the first one since the government announced an ambitious emergency budget that promised to slash the deficit by 6.3 percent of GDP by 2014-15, proved to be a non-event as Mervyn King and company kept policy unchanged and offered no statement to explain their reasoning. By some accounts, this could be seen as a sign of the central bank’s skepticism about the feasibility of the ruling coalition’s plans, though in the meantime a positive tilt to economic data would help fill the fundamental bias vacuum and may encourage further sterling gains in the near term.
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