Key Points
The USA Celebrate Independence Day on Tuesday 4th July
Focus remains on the US with Federal Reserve meeting minutes and non-farm employment change
RBA set to keep rates unchanged.
Market Update
GBP
Sterling went nowhere quickly last week, oscillating around the $1.27 handle for the most part, with market participants continuing to digest the impacts of the BoE’s more hawkish than expected 50bp Bank Rate hike a week prior.
On that note, Governor Bailey reiterated a hawkish tone during his appearance in Sintra, noting that the MPC will “do what’s needed” to bring inflation back to target; not exactly endorsing the 6.25% terminal rate markets price, but opening the door to a hike in August, and potentially another at the following meeting in September.
Looking ahead, this week brings a handful of notable UK releases, in the form of the latest PMI surveys, though these are unlikely to be market-moving, unless the ‘final’ figure differs drastically from the prior ‘flash’ estimate released a couple of weeks ago.
EUR
The common currency was also rather rangebound last week, spending much of the last 5 trading days not budging too far from the $1.09 figure, with catalysts for volatility rather thin on the ground, as the G10 FX market appears to settle into its traditional summer slumber a little early.
That said, investors remain concerned about the ongoing economic slowdown/lack of recovery in China, one of the eurozone’s biggest export markets, while the ECB remain on course to deliver a further 25bp hike later this month, with a further such move in September still up for debate.
In the immediate-term, however, another quiet week may await, with just the aforementioned final PMI surveys of any note on the calendar.
USD
The greenback also had a relatively quiet week last week, consolidating a modest advance from a week prior, with the DXY remaining around 103, and the buck doing little against most of its G10 peers, besides the JPY continuing to slide as the prospect of FX intervention mounts.
Interestingly, the dollar failed to benefit from a continued hawkish repricing of the Treasury curve, with the 2-year yield rising 15bps on the week to its highest levels since March, perhaps a sign that any catalyst for USD upside may not come from monetary policy divergence.
This week, albeit holiday-interrupted due to Independence Day, the main highlight comes on Friday, with the release of the latest jobs report; headline nonfarm payrolls are set to have risen by a healthy 225k last month, while unemployment should remain around 3.7%.
World News
One of the UK’s largest private pension funds has supported Thames Water to turnaround its finances and performance following fears tat the firm could fold. Thames Water is in billions of pounds in debt and there have even been calls for it to be nationalised. The company serves 25% of the UK population face severe issues regarding leakage and sewage, which will take significant time and investment to fix, the government has announced it was ready to act in a worst-case scenario.
Increased supermarket profit margins led to drivers paying an extra 6p per litre, the CMA has found after a year long investigation into the fuel market. They found that competition has weakened as petrol stations decided to increase fuel profit and priced by comparison rather that responding to cost movements in the market. Asda has been fined £60,000 for failure to provide information when required.
Data Releases
| Date | Region | Release | Previous | Consensus |
| Monday 3rd July | US | ISM Manufacturing PMI | 46.9 | 47.2 |
| Tuesday 4th July | AU | Interest Rate Decision | 4.10% | 4.10% |
| Wednesday 5th July | US | US Federal Reserve Meeting Minutes | ||
| Thursday 6th July | US | ISM Services PMI | 50.3 | 51.3 |
| Friday 7th July | US | Non-Farm Employment Change | 339k | 222k |
Indices
| Share Index | Prev. Close | Open |
| FTSE100 | 7,531.53 | 7,531.53 |
| DAX | 16,147.90 | 16,187.91 |
| CAC40 | 7,400.06 |
7,415.17 |