Friday July 17, 2015 - 14:43:09 GMT
Share This Story
. - .
ECONOMIC DATA ANALYSIS FRIDAY 17 JULY
REFOCUSING ON GLOBAL MONETARY POLICY DIVERGENCE
- Greece to meet ECB payment on Monday and a further parliamentary vote is scheduled.
- Markets to refocus on global divergence in monetary policy.
- UK retail sales, BoE minutes and China/euro area PMIs in spotlight.
Grexit risks have subsided for now. Marathon talks last weekend eventually produced an agreement on reform measures to be undertaken by Greece in exchange for a temporary bridging loan and eventually a third bailout. The €7bn bridging loan will enable Greece to pay the €3.5bn due Monday on maturing bonds held by the ECB and also overdue payments to the IMF. The first tranche of the measures agreed by Greece and its creditors have been passed by the Greek parliament. About a quarter of PM Tsipras’s Syriza party, however, voted against the proposals and this may result in a government reshuffle. Further reforms, including the establishment of a €50bn privatisation fund, will be considered by the Greek legislature by this Wednesday. Significant challenges remain, including the ability of the Greek government to implement the agreed reforms over the coming months and years and the impact they may have for the country’s growth and debt sustainability prospects. Some form of debt relief is likely to be considered in due course and may include an extension of maturities, grace periods or lower interest rates.
Market attention to return to interest rate differentials. Cross-country differences in monetary policy will likely now regain prominence. Last week saw the Bank of Canada cut rates by 25bps to 0.5%, while next week the RBNZ (Wed) is expected to follow suit with a quarter-point reduction to 3% and the RBA minutes (Tue) may leave open of the possibility of further easing, possibly in August. The ECB reiterated its expectations to continue with asset purchases until September 2016 and President Draghi warned that the Governing Council would counter any unwarranted tightening of monetary conditions. In contrast, both the US and UK central banks are preparing for higher interest rates. In her semi-annual testimony to Congress last week, Fed Chair Yellen noted that she expected further improvement in the labour market and a rebound in the economy which would make a rise in interest rates this year ‘appropriate’. In a similar vein, BoE Governor Carney indicated that the decision to start increasing rates “will likely come into sharper relief around the turn of this year”.
MPC minutes and retail sales are the key domestic focus next week. Although the MPC appears to be leaning towards a more hawkish stance, the minutes of the July meeting (Wed) will probably still show unanimity to keep policy unchanged, not least because the meeting took place amid global uncertainties relating to Greece and the sharp correction in Chinese equities. Looking ahead, this is set to change and we could see the re-emergence of votes, from at least Weale and McCafferty, to increase interest rates in August. Note that from next month, the policy announcement, minutes and Inflation Report will all be released simultaneously, which could lead to some market volatility. It will also be David Miles’s last meeting. UK June retail sales (Thu) will be the key data release and, based on anecdotal evidence of stronger sales and further discounting, we see a solid increase of 0.7%.
Elsewhere, China and euro area PMIs will provide a gauge for the start of Q3. Official data suggest that annual Chinese GDP was steady at 7.0% in Q2, a little stronger than forecast. The release of the Markit/Caixin manufacturing PMI (Fri) will provide an early guide to activity at the start of Q3 and to what extent policy measures have helped to stabilise the economy. It is forecast to rise to 49.8 in July from 49.4. In the euro area, we anticipate small declines in both euro area consumer confidence (Thu) and the flash manufacturing PMI (Fri).
This document, its contents and any related communication (altogether, the 'Communication') does not constitute or form part of any offer to sell or an invitation to subscribe for, hold or purchase any securities or any other investment. This Communication shall not form the basis of or be relied on in connection with any contract or commitment whatsoever. This Communication is not intended to form, and should not form, the basis of any investment decision. This Communication is not and should not be treated as investment research, a research recommendation, an opinion or advice. Recipients should conduct their own independent enquiries and obtain their own professional legal, regulatory, tax or accounting advice as appropriate. Any transaction which a recipient of this Communication may subsequently enter into may only be on the basis of such enquiries and advice, and that recipient’s own knowledge and experience. This Communication has been prepared by, and is subject to the copyright of, Lloyds. This Communication may not, in whole or in part, be reproduced, transmitted, stored in a retrieval system or translated in any other language in any form, by any means without the prior written consent of Lloyds. This Communication is provided for information purposes only, and is confidential and may not be referred to, disclosed, reproduced or redistributed, in whole or in part, to any other person. This Communication is based on current public information.
Whilst Lloyds TSB ank plc (“Lloyds TSB”) and Bank of Scotland plc ("Bank of Scotland") have exercised reasonable care in preparing this material and any views or information expressed or presented are based on sources it believes to be accurate and reliable, no representation or warranty, express or implied, is made as to the accuracy, reliability or completeness of the facts and data contained herein.
This material has been prepared for information purposes only and Lloyds TSB, Bank of Scotland, their directors, officers and employees are not responsible for any consequences arising from any reliance upon such information. Under no circumstances should this material be treated as an offer or solicitation to offer, to buy or sell any product or enter into any transaction. If you receive information from us which is inconsistent with other information which you have received from us, you should refer this to your Lloyds TSB or Bank of Scotland Relationship Manager for clarification.
Lloyds Bank Corporate Markets, Lloyds TSB Corporate Markets and Lloyds TSB are trading names of Lloyds TSB Bank plc, Lloyds TSB Scotland plc and Bank of Scotland plc. Lloyds TSB Bank plc. Registered Office:25 Gresham Street,LondonEC2V 7HN. Registered inEnglandandWalesno. 2065. Lloyds TSB Scotland plc. Registered Office: Henry Duncan House,120 George Street,EdinburghEH2 4LH. Registered inScotlandno. 95237. Bank of Scotland plc. Registered Office: The Mound,EdinburghEH1 1YZ. Registered inScotlandno. SC32700. Authorised and regulated by the Financial Services Authority under registration numbers 119278, 191240 and 169628 respectively.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."