July 30, 2024

“It’s beginning to get very busy in the FX markets today. Eurozone growth and inflation data fills the morning, and then the focus shifts to the US consumer and the labour market this afternoon. That’s then followed by two central bank decisions and half a dozen top-tier data releases tomorrow.”

Tim Hallinan – Trading Director

Main Headlines

With Trump’s poll lead for the presidential election having narrowed significantly since Biden dropped out of the race, the former president’s campaign is set to launch a $10m advertising round in swing states this week to fend off rising support for rival Kamala Harris.

British Chancellor Rachel Reeves announced to parliament yesterday that she would order £5.5bn in cuts to public services, blaming a £22bn unfunded fiscal hole left by the previous government. She also announced the end of the universal winter fuel payment for pensioners, and agreed to accept a 22% pay rise for junior doctors over the next two years.

GBP

Sterling recovered from an initial dip to end the session flat yesterday, with markets holding on for stronger clues from the raft of data being released this week. There were a couple of data points yesterday, and net consumer lending grew by a higher-than-expected £3.8bn – the highest since March 2023 – while mortgage approvals held steady at 60K. Overall, however, there was little for markets to trade on until today’s calendar, with a stream of data coming out of the eurozone and the US. There’s nothing domestic to nudge the pound, however, and it’s the Bank of England on Thursday that will be the biggest mover this week.

EUR

The euro traded on the soft side yesterday without an obvious driver, but some strong GDP data so far this morning has stabilised EUR/USD. French second-quarter GDP grew 0.3% versus a 0.2% consensus estimate, and Spain has followed suit with an impressive 0.8% rate of growth for the second quarter in a row. Italy, Germany, and the eurozone follow this morning, and a positive growth picture could help to support the common currency. Moving on to inflation, Spanish CPI landed lower than expected for July at 2.9%, supporting the view that eurozone core inflation should cool off again tomorrow, and we get the German figures released by region throughout the morning.

USD

The JOLTS job openings data and the July consumer confidence index are the main events for the dollar today. The consensus for job openings is looking for a return to around the 8M level, after a tick up to 8.14M in June that broke a relatively swift decline in labour demand seen in the first half of the year. Another fall would represent a continued rebalancing between labour demand and supply that should ease inflationary pressures and again reinforce bets on a September rate cut. Consumer confidence is expected to soften to below the 100 level for only the second time in the past few years, reflecting the consumer weakness we’re beginning to witness in earnings reports like that of McDonald’s, who missed revenue estimates on weaker sales. Tomorrow is extremely busy, too, with an ADP non-farms report, the ECI, and a Fed decision ahead.

Markets

Stocks were broadly directionless yesterday as tentative traders held on to their positions ahead of a string of US megacap earnings reports and a Federal Reserve decision. Oil fell further on a weak demand picture – this time to a seven-week low – despite inflamed tensions in the Middle East that could threaten supply.

Main Economic Events (All Times CET)

9:00am: Spanish Flash CPI
11:00am: Eurozone Prelim GDP q/q
4:00pm: US CB Consumer Confidence
4:00pm: US JOLTS Job Openings

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