The euro has edged higher against the dollar, despite yesterday’s stronger than expected GDP data in the US, trading at around $1.0850 this morning, and is also firmer against sterling at 84.4p, with the pound slipping a little further against the dollar to around $1.2860. Meanwhile, US inflation data due later will be the focus for markets today.
Yesterday’s Events
The better-than-expected GDP data didn’t prevent a further fall in US stocks, with the Nasdaq and S&P 500 off another 0.9% and 0.5% respectively yesterday, while European equities shed around 1%. US bond yields did reverse course following the data though, erasing sizeable declines to close slightly higher on the day.
Growth in the US economy picked up in the second quarter helped by a reacceleration in consumer spending, with GDP increasing by 0.7% q-o-q having risen by 0.3% in the opening quarter of the year. Nonetheless, there has been a step down in the pace of growth in 2024 relative to the second half of 2023, when GDP rose by an average of 1% a quarter over the final two quarters of the year.
ECB member Nagel says wage growth in the Euro area is still “very robust” and the return of inflation to its 2% target will be “bumpy” but adds that the central bank should be able to lower interest rates further over the coming months.
The Day Ahead
PCE inflation data due in the US today are expected to show headline and core prices rose by 0.1% and 0.2% month-on-month respectively in June, which would see the year-on-year rates of inflation fall to 2.4% and 2.5% respectively from 2.6% for both in May. An outturn along these lines should keep intact market expectations for a Fed rate cut in September.
Other data scheduled for today include consumer spending and consumer confidence in the US, while the ECB publishes its latest survey of consumer inflation expectations.
Author: Ellen Moloney
Tel: 1800 30 30 03 / +353 (0)1 790 0000
25 Jul 2024
Today's Talking Points 25.07.24
Market Commentary
While yesterday’s sharp sell-off in equity markets might have been expected to be accompanied by a strengthening of the dollar, a firming of Fed rate cut expectations was pulling the currency in the opposite direction. In any case, the upshot is that the dollar is only marginally firmer from yesterday morning vis-a-vis the euro and sterling, trading at around $1.0830 and $1.2880 respectively this morning ahead of the release of second quarter GDP data in the US later today. Meanwhile, EURGBP is not much changed either, as it continues to hover in and around the £0.84 level.
Yesterday’s Events
The US led a decline in equity markets with the Nasdaq shedding more than 3.5% and the S&P 500 off almost 2.5% (amid notable declines in Alphabet and Tesla, two of the so-called Magnificent Seven stocks), while European stocks closed more than 1% lower. In government bond markets, a firming of Fed rate cut expectations (prompted by a former Fed member, who said the central bank should cut rates as soon as next week’s meeting) saw US 2-year yields decline by around 6bps, though 10-year yields reversed course during the session to end slightly higher on the day.
The Euro area economy essentially stagnated in July according to the flash PMI data published yesterday, with the composite index falling for a second consecutive month to 50.1 (just marginally above the key expansion-contraction level of 50). This adds to signs that growth is undershooting the ECB’s expectations, which strengthens the case for it to cut interest rates at its next meeting in September. Meanwhile, the equivalent PMI data for the UK suggests the economy continued to grow at a modest pace in July (with the composite index rising slightly to 52.7).
The Day Ahead
The key economic data release today is the GDP report in the US. According to the consensus forecast, this is expected to show the economy grew by 2% (annualised rate) in the second quarter of this year. While this would be slightly stronger than in Q1 (1.4%), it would still leave growth over the first two quarters of this year well down from the average rate of circa 4% a quarter recorded over the final two quarters of last year.
Other data due today include weekly jobless claims and durable goods orders in the US and money supply & credit growth in the Euro area.
Author: Ellen Moloney
Tel: 1800 30 30 03 / +353 (0)1 790 0000
23 Jul 2024
Today's Talking Points 23.07.24
Market Commentary
It was a very quiet start to the week in FX markets yesterday with the main currency pairs confined to extremely tight ranges. The euro is trading at around $1.0890 against the dollar and at £0.8425 against sterling this morning, while the pound is trading at about $1.2920 against the US currency. The economic data calendar is light again today, so it could be another subdued session ahead.
Yesterday’s Events
It was also quiet in government bond markets yesterday, with yields generally flat to marginally higher on the day. There was a bit more action though in equity markets, which staged a partial rebound following last week’s sharp fall. European stocks advanced by 1.5% (having shed more than 4% last week), while the Nasdaq led the recovery in US indices, gaining around 1.6%.
ECB member Kazimir says the central bank is “on track to return to our (inflation) target, but we are clearly not there yet,” noting that “due to various factors, both domestic and global, there is still a non-negligible risk of inflationary pressures re-emerging.” He also says market expectations for around two more interest rate cuts over the rest of this year are not “entirely misplaced” but should not be taken as “a given” either. The market currently sees about an 80% chance of a 25bps cut at the ECB’s next meeting in September.
The Day Ahead
As mentioned, there is a light economic data calendar again today, with consumer confidence in the Euro area and existing home sales in the US, before some key releases over the remainder of the week, starting tomorrow with flash PMIs for July in the main economies. Meanwhile, ECB Chief Economist Philip Lane speaks on the challenges for monetary policy later this morning.
Author: Ellen Moloney
Tel: 1800 30 30 03 / +353 (0)1 790 0000
22 Jul 2024
Today's Talking Points 22.07.24
Market Commentary
The euro and sterling both retreated from Wednesday’s highs against the dollar – of about $1.0950 and $1.3045 respectively – over the second half of last week, as the US currency benefited from a slide in international equity markets, while the pound also fell back from its best levels of the week versus the euro, of just over 83.8p set on Wednesday as well.
Meanwhile, news of Joe Biden’s decision to withdraw from the US presidential election has had little impact on markets overnight. EURUSD and GBPUSD are not much changed from Friday’s close, trading at around $1.0880 and $1.2920 respectively this morning, while EURGBP is hovering in and around £0.8420. Looking to the week ahead, second-quarter GDP and June PCE inflation in the US on Thursday and Friday respectively are probably the key economic releases of the week, as they could help shape market expectations for Fed rate cuts over the coming months with potential consequences for the dollar.
Yesterday’s Events
Equity markets had a tough time of it last week. European stocks closed lower for a fifth straight session on Friday, shedding more than 4% over the week, while the Nasdaq led a decline in US indices – falling almost 4% from the previous Friday’s close – ahead of earnings results from some of the so-called Magnificent Seven companies this week. It was a mixed week in government bond markets meanwhile, with US and UK yields ending slightly higher overall but German yields finishing marginally lower.
ECB member Simkus said on Friday he has “no doubt that the issue of cutting (interest rates) will be put up for discussion” at the central bank’s next meeting in September, adding that he agrees with current market pricing for circa two further quarter-point rate cuts over the remainder of this year.
The Day Ahead
In terms of economic data for the week ahead, as mentioned, GDP and inflation data are due in the US on Thursday and Friday respectively. Before that, flash PMIs for July are published on Wednesday, which will give an indication on how the main economies are faring at the start of Q3. There are also several ECB members scheduled to speak over the course of the week.
Author: Ellen Moloney
Tel: 1800 30 30 03 / +353 (0)1 790 0000
19 Jul 2024
Today's Talking Points 19.07.24
Market Commentary
Yesterday’s ECB meeting proved to be something of a non-event for markets, as the central bank left interest rates unchanged as expected and gave little away about its next move, while the dollar gained ground amid a sell-off in equity markets. The US currency has extended its gains overnight and is currently trading at around $1.0880 and $1.2925 versus the euro and sterling respectively. EURGBP is largely unchanged meanwhile, trading at around £0.8420. UK retail sales released earlier this morning came in a good bit weaker than expected in June, but this has had little impact on the pound so far. European equity markets remained under pressure, closing lower for a fourth straight session, while the main indices in the US all finished in the red with the S&P 500 shedding almost 1% as it retreated further from Tuesday’s all-time high. In government bond markets, US 10-year yields rose on the day, despite the fall in stocks, increasing by around 5bps, while German yields also nudged higher.
Yesterday’s Events
The ECB statement accompanying yesterday’s interest rate decision said “incoming information broadly supports (its) previous assessment of the medium-term inflation outlook”, which is for a return of inflation to the 2% target over the second half of 2025. It again noted though that “domestic price pressures are still high, services inflation is elevated and headline inflation is likely to remain above the target well into next year.”
Regarding the ECB’s next meeting in September, Christine Lagarde said the interest rate decision then “remains wide open.” However, if the ECB’s updated projections in September continue to point to inflation returning to target over the second half of 2025 – as seems likely viewed from the current juncture – then it will probably lower interest rates again. The market sees a circa 80% chance of a quarter-point cut, little changed from before yesterday’s meeting.
Retail sales volumes in the UK fell by 1.2% in June according to this morning’s data. This followed an outsized gain of 2.9% in May, which in turn came after a sizeable decline in April. Looking through the volatility in the monthly outturns, sales volumes were essentially flat in the second quarter after increasing by almost 2% in Q1.
The Day Ahead
It is quiet end to the week in terms of economic data with little of note due. The ECB publishes its latest Survey of Professional Forecasters, while a couple of Fed members are scheduled to speak through the course of the day
Dealer Comments
Today's Talking Points 26.07.24
Market Commentary
The euro has edged higher against the dollar, despite yesterday’s stronger than expected GDP data in the US, trading at around $1.0850 this morning, and is also firmer against sterling at 84.4p, with the pound slipping a little further against the dollar to around $1.2860. Meanwhile, US inflation data due later will be the focus for markets today.
Yesterday’s Events
The better-than-expected GDP data didn’t prevent a further fall in US stocks, with the Nasdaq and S&P 500 off another 0.9% and 0.5% respectively yesterday, while European equities shed around 1%. US bond yields did reverse course following the data though, erasing sizeable declines to close slightly higher on the day.
Growth in the US economy picked up in the second quarter helped by a reacceleration in consumer spending, with GDP increasing by 0.7% q-o-q having risen by 0.3% in the opening quarter of the year. Nonetheless, there has been a step down in the pace of growth in 2024 relative to the second half of 2023, when GDP rose by an average of 1% a quarter over the final two quarters of the year.
ECB member Nagel says wage growth in the Euro area is still “very robust” and the return of inflation to its 2% target will be “bumpy” but adds that the central bank should be able to lower interest rates further over the coming months.
The Day Ahead
PCE inflation data due in the US today are expected to show headline and core prices rose by 0.1% and 0.2% month-on-month respectively in June, which would see the year-on-year rates of inflation fall to 2.4% and 2.5% respectively from 2.6% for both in May. An outturn along these lines should keep intact market expectations for a Fed rate cut in September.
Other data scheduled for today include consumer spending and consumer confidence in the US, while the ECB publishes its latest survey of consumer inflation expectations.
25 Jul 2024
Today's Talking Points 25.07.24
Market Commentary
While yesterday’s sharp sell-off in equity markets might have been expected to be accompanied by a strengthening of the dollar, a firming of Fed rate cut expectations was pulling the currency in the opposite direction. In any case, the upshot is that the dollar is only marginally firmer from yesterday morning vis-a-vis the euro and sterling, trading at around $1.0830 and $1.2880 respectively this morning ahead of the release of second quarter GDP data in the US later today. Meanwhile, EURGBP is not much changed either, as it continues to hover in and around the £0.84 level.
Yesterday’s Events
The US led a decline in equity markets with the Nasdaq shedding more than 3.5% and the S&P 500 off almost 2.5% (amid notable declines in Alphabet and Tesla, two of the so-called Magnificent Seven stocks), while European stocks closed more than 1% lower. In government bond markets, a firming of Fed rate cut expectations (prompted by a former Fed member, who said the central bank should cut rates as soon as next week’s meeting) saw US 2-year yields decline by around 6bps, though 10-year yields reversed course during the session to end slightly higher on the day.
The Euro area economy essentially stagnated in July according to the flash PMI data published yesterday, with the composite index falling for a second consecutive month to 50.1 (just marginally above the key expansion-contraction level of 50). This adds to signs that growth is undershooting the ECB’s expectations, which strengthens the case for it to cut interest rates at its next meeting in September. Meanwhile, the equivalent PMI data for the UK suggests the economy continued to grow at a modest pace in July (with the composite index rising slightly to 52.7).
The Day Ahead
The key economic data release today is the GDP report in the US. According to the consensus forecast, this is expected to show the economy grew by 2% (annualised rate) in the second quarter of this year. While this would be slightly stronger than in Q1 (1.4%), it would still leave growth over the first two quarters of this year well down from the average rate of circa 4% a quarter recorded over the final two quarters of last year.
Other data due today include weekly jobless claims and durable goods orders in the US and money supply & credit growth in the Euro area.
23 Jul 2024
Today's Talking Points 23.07.24
Market Commentary
It was a very quiet start to the week in FX markets yesterday with the main currency pairs confined to extremely tight ranges. The euro is trading at around $1.0890 against the dollar and at £0.8425 against sterling this morning, while the pound is trading at about $1.2920 against the US currency. The economic data calendar is light again today, so it could be another subdued session ahead.
Yesterday’s Events
It was also quiet in government bond markets yesterday, with yields generally flat to marginally higher on the day. There was a bit more action though in equity markets, which staged a partial rebound following last week’s sharp fall. European stocks advanced by 1.5% (having shed more than 4% last week), while the Nasdaq led the recovery in US indices, gaining around 1.6%.
ECB member Kazimir says the central bank is “on track to return to our (inflation) target, but we are clearly not there yet,” noting that “due to various factors, both domestic and global, there is still a non-negligible risk of inflationary pressures re-emerging.” He also says market expectations for around two more interest rate cuts over the rest of this year are not “entirely misplaced” but should not be taken as “a given” either. The market currently sees about an 80% chance of a 25bps cut at the ECB’s next meeting in September.
The Day Ahead
As mentioned, there is a light economic data calendar again today, with consumer confidence in the Euro area and existing home sales in the US, before some key releases over the remainder of the week, starting tomorrow with flash PMIs for July in the main economies. Meanwhile, ECB Chief Economist Philip Lane speaks on the challenges for monetary policy later this morning.
22 Jul 2024
Today's Talking Points 22.07.24
Market Commentary
The euro and sterling both retreated from Wednesday’s highs against the dollar – of about $1.0950 and $1.3045 respectively – over the second half of last week, as the US currency benefited from a slide in international equity markets, while the pound also fell back from its best levels of the week versus the euro, of just over 83.8p set on Wednesday as well.
Meanwhile, news of Joe Biden’s decision to withdraw from the US presidential election has had little impact on markets overnight. EURUSD and GBPUSD are not much changed from Friday’s close, trading at around $1.0880 and $1.2920 respectively this morning, while EURGBP is hovering in and around £0.8420. Looking to the week ahead, second-quarter GDP and June PCE inflation in the US on Thursday and Friday respectively are probably the key economic releases of the week, as they could help shape market expectations for Fed rate cuts over the coming months with potential consequences for the dollar.
Yesterday’s Events
Equity markets had a tough time of it last week. European stocks closed lower for a fifth straight session on Friday, shedding more than 4% over the week, while the Nasdaq led a decline in US indices – falling almost 4% from the previous Friday’s close – ahead of earnings results from some of the so-called Magnificent Seven companies this week. It was a mixed week in government bond markets meanwhile, with US and UK yields ending slightly higher overall but German yields finishing marginally lower.
ECB member Simkus said on Friday he has “no doubt that the issue of cutting (interest rates) will be put up for discussion” at the central bank’s next meeting in September, adding that he agrees with current market pricing for circa two further quarter-point rate cuts over the remainder of this year.
The Day Ahead
In terms of economic data for the week ahead, as mentioned, GDP and inflation data are due in the US on Thursday and Friday respectively. Before that, flash PMIs for July are published on Wednesday, which will give an indication on how the main economies are faring at the start of Q3. There are also several ECB members scheduled to speak over the course of the week.
19 Jul 2024
Today's Talking Points 19.07.24
Market Commentary
Yesterday’s ECB meeting proved to be something of a non-event for markets, as the central bank left interest rates unchanged as expected and gave little away about its next move, while the dollar gained ground amid a sell-off in equity markets. The US currency has extended its gains overnight and is currently trading at around $1.0880 and $1.2925 versus the euro and sterling respectively. EURGBP is largely unchanged meanwhile, trading at around £0.8420. UK retail sales released earlier this morning came in a good bit weaker than expected in June, but this has had little impact on the pound so far. European equity markets remained under pressure, closing lower for a fourth straight session, while the main indices in the US all finished in the red with the S&P 500 shedding almost 1% as it retreated further from Tuesday’s all-time high. In government bond markets, US 10-year yields rose on the day, despite the fall in stocks, increasing by around 5bps, while German yields also nudged higher.
Yesterday’s Events
The ECB statement accompanying yesterday’s interest rate decision said “incoming information broadly supports (its) previous assessment of the medium-term inflation outlook”, which is for a return of inflation to the 2% target over the second half of 2025. It again noted though that “domestic price pressures are still high, services inflation is elevated and headline inflation is likely to remain above the target well into next year.”
Regarding the ECB’s next meeting in September, Christine Lagarde said the interest rate decision then “remains wide open.” However, if the ECB’s updated projections in September continue to point to inflation returning to target over the second half of 2025 – as seems likely viewed from the current juncture – then it will probably lower interest rates again. The market sees a circa 80% chance of a quarter-point cut, little changed from before yesterday’s meeting.
Retail sales volumes in the UK fell by 1.2% in June according to this morning’s data. This followed an outsized gain of 2.9% in May, which in turn came after a sizeable decline in April. Looking through the volatility in the monthly outturns, sales volumes were essentially flat in the second quarter after increasing by almost 2% in Q1.
The Day Ahead
It is quiet end to the week in terms of economic data with little of note due. The ECB publishes its latest Survey of Professional Forecasters, while a couple of Fed members are scheduled to speak through the course of the day