July 01, 2022
Daily Report 01/07/2022
Sterling drifted lower in early Europe on Thursday with no support from the latest data, especially given a much larger than expected current account deficit of over £50bn for the first quarter. Given the tightening of global financial conditions, there were increased concerns that the UK would find it difficult to attract capital inflows without an even cheaper currency. Latest ONS data suggested that domestic activity had slowed in the latest week with the rail strike having a limited negative impact
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The German labour-market data recorded a sharp increase in unemployment of 133,000 for June after a 4,000 decline the previous month while the unemployment rate increased to 5.3% from 5.0%. The much weaker than expected data was significant in undermining Euro support. Source reports indicated that the ECB will use proceeds from maturing German, French and Dutch bonds to buy bonds from Italy, Greece, Spain and Portugal in order to cap yields and lessen the threat of fragmentation. The sources also indicated that the buying will start on July 1stas the wider bond-buying comes to a close.
10:00 HICP (YoY) Forecast 8.3% Previous 8.1%
US initial jobless claims declined marginally to 231,000 from a revised 233,000 and slightly above consensus forecasts with continuing clams unchanged at 1.33mn.The PCE prices index increased 0.6% for May with the annual rate unchanged at 6.3%. The underlying rate recorded a 0.3% increase while the year-on-year rate declined to 4.7% from 4.9% and slightly below expectations of 4.8%. The slightly weaker than expected inflation triggered some fresh optimism that peak inflation pressures might have been seen. There was very choppy trading surrounding the London fix as month-end position adjustment dominated. Overall the dollar lost ground amid the decline in US yields.
15:00 ISM Manufacturing PMI (Jun) Forecast 55 Previous 56.1