- Australian inflation drops
- Sterling may have turned the corner
- US versus EU trade discussions due today
By David Johnson
Australian Dollar drops on disappointing inflation
Australian consumer inflation was weaker than expected in June. At 2.1% on the year, it was down on the market expectations and down on last month. It whipped the rug from beneath anyone pressing the Reserve Bank of Australia to raise interest rates and it seem certain, with the slowdown in China (Australia’s main export market), the RBA will keep rates on hold for quite some time. The Australian Dollar weakened on the news and starts the day at A$1.7750 against the Pound and that is slightly above the short term support level.
Sterling sneaking back up – will data help?
Having dipped in recent days, Sterling is back on the up after Prime Minister Theresa May seemed to be getting a grip on her wayward cabinet. The GBPEUR rate is up around 1.1250 again and there are a couple of technical measures that suggest it has turned a corner for the short term at least. Further gains look more likely. Whether today’s data will support that is another matter… Mortgage lending and the CBI retail survey are due today. I suspect the CBI report will be a tad negative but the housing market has shown signs of recovery of late, so the mortgage approvals numbers should be Sterling-supportive.
Brexit and EU economic factors discussed today
The results of a trio of surveys will be published today by the IFO institute in Germany. They measure business reaction to the current business assessment, future expectations and the more widely followed current climate index. All three are forecast to be weaker than previous months. That is a reflection of a lot of factors, including the belated realisation that a bad Brexit deal will be bad for Germany as well and the fact that the global economy is slowing and an awareness that the US tariffs on EU car imports hangs in the balance. Jean Claud Juncker is meeting the US president to argue the toss on that. We await the outcome with interest.
US Dollar could weaken on data today
Neatly segueing into the US data, we will get to see the new home sales figures for June as well as the Crude Oil Inventories. With oil prices relatively stable but elevated, a drop in inventories, which is what we expect, does open the door to further demand and that may shift the price of crude oil. A rise in commodity prices tends to weaken the US Dollar (the currency in which commodities are traded). So that is worth watching out for later. The Sterling – USD rate is declining in a fairly orderly patter, with $1.32 at the top end and $1.28 at the bottom of this channel.
And, as many of us are flying or have flown to holiday destinations, take a moment to toast one of the men who made it possible. On this day in 1909, Louis Blériot made the first flight across the English Channel in a heavier-than-air machine. It took him 37 minutes to travel from Calais to Dover. That is a special kind of bravery and, as it wasn’t run by Ryanair, he actually landed in Dover.