- Sterling-Euro continues to trade at an eight-year low
- Mario Draghi keeps cards close to his chest
- World markets lifted on US tax reform discussion
By Chris Verdet
Yesterday saw world markets lifted somewhat, after comments from the US regarding the simplification of passing Donald Trump’s Corporate Tax reforms. We await Canadian Retail Sales and US House Price data releases this afternoon.
The keynote speech from European Central Bank (ECB) President, Mario Draghi, at the Opening Ceremony of the 6th Lindau Meeting on Economic Sciences provided very few clues as to ongoing and future European economic policy. Markets were hoping for some insights in advance of the Jackson Hole Economic Symposium. He stated that policy that has foundation in rigorous research is less prone to being impaired, yet made no comments about the timing and scope of the EU’s monetary stimulus. The overall tone of his speech has been seen as somewhat vanilla.
Meanwhile, we also saw Sterling-Euro trade at an eight-year low – it’s being reported that the UK may now seek a compromise regarding European Court of Justice jurisdiction ahead of trade negotiations. Once again, Brexit concerns seem to be overshadowing economic data when it comes to the strength of the Pound.
Today’s data releases include the Flash Eurozone Composite Purchasing Managers' Index (PMI), demonstrating the best month-on-month growth for the Eurozone’s manufacturing companies in six and a half years. The Eurozone Manufacturing PMI increased from 56.6 to 57.4, well above the 56.3 forecast. German performance was a key driver of manufacturing growth this month. At the same time, Eurozone services PMI results were disappointing, falling from 55.4 to a seven-month low of 54.9. The results raised concerns over a drop in new order growth, although markets do not seem overly concerned.
In the UK, a surplus of £184 million was reported in the UK Public Sector Net Borrowing month-on-month figures for the first time in over ten years, in stark contrast to the £1 billion deficit that markets were expecting. This is a positive sign for the UK economy, out of the red for the first time in over a decade and a boost for the current UK government. However, year-on-year figures showed an increase to £22.8 billion from £1.9 billion, with forecasts from the Office for Budget Responsibility (OBR) that public sector net borrowing, excluding public banks, could increase to £58.3 billion for the financial year ending March 2018.