Analysts at TD Securities are expecting the U.S. Philly Fed survey to show a decline to 10.7 in June following the notable 8.1 increase to 16.6 in May.
Sonia Meskin, the U.S. economist at Standard Chartered, notes that at the June FOMC meeting, the Committee clearly left the door open for a rate cut, without indicating a definitive commitment to easing and was consistently communicated in the Summary of Economic Projections (SEP), the statement and the press conference.
The Bank of Egland (BoE) announced its Monetary Policy Committee (MPC) voted unanimously to maintain Bank Rate at 0.75 percent at its latest meeting.
The MPC also voted unanimously to maintain the corporate bond purchases at £10 billion and UK government bond purchases at £435 billion.
In its statement, the BoE says:
Bill Diviney, the senior economist at ABN AMRO, suggests that, despite aggressive pricing for Fed rate cuts, the FOMC statement and a dovish Chair Powell press conference appeared to more than satisfy market expectations, with bond yields moving lower and equities pushing higher.
James Smith, the developed markets economist at ING, notes that the UK's retail sales have fallen for the second month in a row.
TD Securities' analysts note that as widely expected there was no change to BoJ policy, in a 7-2 vote.
European Central Bank Vice President Luis de Guindos said that the last monetary decision taken by the central bank was taken unanimously by members of the Council.
"I believe (the decision) was taken unanimously. There was no divergent opinion with relation to the communique of the decision taken in Vilnius two weeks ago," de Guindos said.
At the meet, there had been two main issues, de Guindos said, including the extension of the forward guidance on when the bank would raise interest rates and the cost of the ECB's Longer-Term Refinancing Operation (TLTRO III).
"There was also unanimity in that, if the situation deteriorated because downside risks materialised, we would immediately react," de Guindos said.
James Smith, developed markets economist at ING, points out that Norges Bank has taken its tightening cycle a step further on Thursday by increasing interest rates a quarter point to 1.25% which is in stark contrast to many of its developed markets peers.
“Given this move was clearly flagged back in May, the bigger focus is the Norwegian central bank’s new interest rate projection – and as expected it’s a tale of two halves. Probably the biggest news is that the central bank thinks it will “most likely” hike again over the course of 2019, having previously seen the next move around the first quarter of 2020. That follows a better-than-expected reading from the latest oil investment survey for 2019 spending. We expect the central bank to hike rates again December, although as ever a lot will depend on how trade tensions evolve over coming months.”
British employers offered staff pay rises averaging 2.5% as part of wage settlements in the three months to May, matching the trend seen for most of this year.
Human resources data firm XpertHR said pay settlements had hovered around the same level since the start of 2019, despite a small pick-up in inflation.
"Following a dip in the second half of 2018, the first half of 2019 is dominated by pay rises in the region of 2.5%," XpertHR analyst Sheila Attwood said.
After years of falls in pay when adjusted for inflation, Britain's workers have had some of the biggest pay rises in a decade in recent months due to a tight labour market though they are modest compared to pre-financial crisis rates of pay growth.
Analysts at TD Securities point out that the EU Leaders have gathered to discuss filling the positions of EU Council President, EU Commission President, and ECB President.
“They had earlier hoped to finalise the nominations over dinner on Thursday (with a press conference to follow), but EU election results have complicated the negotiations, and there's no clear "winning formula" for the three top jobs now. It's not impossible that the ECB President be named later tonight (or at least, an unofficial list of finalists leaked), but it looks more and more like the decisions will now take place at an "emergency summit" on 30 June / 1 July.”
According to the report from Office for National Statistics, in the three months to May 2019, the quantity bought in retail sales increased by 1.6% when compared with the previous three months, with growth across all stores except department stores and household goods stores. The fall of 0.9% in the quantity bought in department stores in the three months to May 2019 was the eighth consecutive month of no positive growth in this sector.
The quantity bought in May 2019 decreased by 0.5% when compared with the previous month, with a strong decline of 4.5% in clothing sales. In May 2019, online retailing accounted for 19.3% of total retailing, with an overall growth of 8.2% when compared with the same month a year earlier.
When compared with a year earlier, both the amount spent and quantity bought showed growth of 2.7% and 2.3% respectively in May 2019. The year-on-year growth rate in the average store price for clothing fell for the ninth consecutive month in May 2019 but evidence from retailers suggested that the poor weather may have delayed the sales for summer ranges.
Analysts at TD Securities suggest that they are updating levels in the wake of Wednesday's FOMC meeting and with economic data mixed and Brexit/politics muddling the outlook, the MPC is likely to vote unanimously to leave policy on hold.
“Increasingly hawkish comments set against a more worrisome global backdrop set the stage for surprise this week. Our base case still sees a muted reaction in GBP, particularly as it has already had a decent run this week. Directional risks remain more a function of the UK's political backdrop and global risk environment.”
Survey-based indicators confirm a gradual weakening in growth momentum
Global financial conditions have been volatile in recent months
Global growth is projected to decelerate this year amid increasing headwinds
The European Central Bank is considering using all instruments at its disposal unless there is improvement in the euro zone economy, member of the ECB Governing Council Olli Rehn said.
"We in the Governing Council are ready to act as appropriate unless there is improvement in the economic conditions," Rehn told a conference in Brussels.
Asked whether the ECB should proceed with rate cuts or more asset purchases, Rehn said: "The whole range of instruments is on the table."
In view of analysts at Danske Bank, the key event today will be the Norges Bank meeting, where both consensus and Danske are looking for a 25bp rate hike.
“The Bank of England also meets, but in our view, the bank is firmly on hold. It is one of the small meetings without an updated inflation report or a press conference so we don't expect much change in the bank's message. The UK also releases May retail sales. A two-day EU summit starts today, where the main focus will be on potential clarity on the front-runners for the EU Commission presidency, ECB presidency other EU top positions. We will also monitor if the EC will formally open an EDP against Italy. On the data front, we expect Euro area consumer confidence for June to stay unchanged.”
U.S. President Donald Trump risks hurting investor sentiment if he removes Jerome Powell as chair of the Federal Reserve, according to a former Fed governor.
“To fire a Federal Reserve governor or chairman would be a very unprecedented move, it would result in turmoil in the financial markets, it would be something that you really don’t want to do because you don’t need an absolute increase in uncertainty which this would bring about,” Robert Heller, a member of the Fed’s Board of Governors from 1986 to 1989, told.
Heller’s comment came as Bloomberg, citing people familiar with the matter, reported on Wednesday that Trump said he believes he has the authority to demote Powell.
“We expect the Bank of England to keep rates unchanged at 0.75% at today's meeting. The vote is likely to be unanimous still, even as a number of influential MPC members have made some relatively hawkish speeches recently. The hawks are focusing on decent wage growth amid low unemployment, but the warnings with regards to rate increases are falling on deaf ears. The downside risks resulting from Brexit and trade uncertainties outweigh the upside risks of slightly elevated domestic price pressures. We forecast no rate hikes for this year and next.”
Goldman Sachs Group Inc analysts now expect the U.S. Federal Reserve to cut interest rates in July and in September, according to a research note issued after Fed Chairman Jerome Powell on Wednesday signaled a rate cut as early as next month.
This marks a reversal for Goldman, whose economists said as recently as June 16 that the hurdle for rate cuts is “higher than widely believed.” Goldman is one of the 24 primary dealers that does business directly with the Fed.
Interest rate futures surged in response to Powell’s remarks at the end of a two day policy meeting that left rates on hold. Traders are now betting heavily on three cuts by the end of the year. The Fed’s target rate the Fed funds rate is 2.25% to 2.50%.
Expects inflation to gradually pick up towards 2% target
Risks associated with overseas economies are significant
Need to watch for impact on business, consumer sentiment
The Italian government proposes to use 5.2 billion euros in expected improvements in its 2019 budget position to avoid EU disciplinary action for excessive debt, financial daily Il Sole 24 Ore said.
The newspaper said the improvements consisted of expected savings on forecast expenditure of about 2 billion euros and higher-than-expected revenues of 3.2 billion euros, saying Rome would offer to use these to reduce the forecast deficit.
"The package decided yesterday, in summary, is worth 5.2 billion euros in 2019 and would bring the deficit for this year to 2.2% (of gross domestic product)...," Il Sole said.
According to the report from Federal Statistical Office, in May 2019, the slowdown continued in both trading directions. For example, exports fell by 0.5 percent for the third time in succession. By contrast, imports grew by 0.9 percent. The trade balance showed a surplus of 1.7 billion francs compared to .1.9 billion francs in April.
In May 2019, exports recorded seasonally adjusted - 0.5 percent (real: - 1.2 percent) - the third monthly decline in a row. As a result, exports have tended to decline slightly overall since the beginning of the year. Meanwhile, imports increased by 0.9 per cent (in real terms: + 0.7 per cent), meaning that they have been on an upward trajectory since November 2018 - albeit now slowing. The surplus on the trade balance was 1.7 billion francs.
Resistance levels (open interest**, contracts)
Price at time of writing this review: $1.1265
Support levels (open interest**, contracts):
- Overall open interest on the CALL options and PUT options with the expiration date July, 5 is 66284 contracts (according to data from June, 19) with the maximum number of contracts with strike price $1,1300 (4433);
Resistance levels (open interest**, contracts)
Price at time of writing this review: $1.2680
Support levels (open interest**, contracts):
- Overall open interest on the CALL options with the expiration date July, 5 is 17661 contracts, with the maximum number of contracts with strike price $1,3000 (3030);
- Overall open interest on the PUT options with the expiration date July, 5 is 15422 contracts, with the maximum number of contracts with strike price $1,2500 (2300);
- The ratio of PUT/CALL was 0.87 versus 0.90 from the previous trading day according to data from June, 19
* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.
** - Open interest takes into account the total number of option contracts that are open at the moment.
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