August 05, 2022

Daily Report 05/08/2022

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The UK PMI construction index declined to 48.9 for July from 52.6 the previous month which was below consensus forecasts of 52.0 and the weakest reading since May 2020. New orders did remain in expansion territory, but business confidence remained subdued while cost pressures were the weakest since March 2021.The Bank of England raised interest rates by 50 basis points to 1.75% which was in line with consensus forecasts and the highest level since late 2008. There was an 8-1 vote with Tenreyro voting for a smaller increase to 1.50%. The bank raised its inflation forecast with a peak now seen above 13% late this year due to the fresh surge in retail energy prices. The bank also downgraded its economic forecasts with GDP seen contracting in 2023 and 2024 with five quarters of negative growth as real disposable incomes is set to decline by the largest amount since records began 1964. Forecasts could, however, be adjusted if there is a strong fiscal stimulus.

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The Euro was held in narrow ranges ahead of Thursday’s New York open as it held against the dollar while there was resistance in the air as markets mulled the outlook for global economies and interest rates. There were still important reservations over the impact of very high gas prices within the Euro-Zone, especially as pressures will intensify ahead of the winter period which will pose important risks to the outlook.

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Initial US jobless claims increased slightly to 260,000 in the latest week from 254,000 previously, in line with market expectations and the highest reading since January while continuing claims increased to 1.42mn from 1.37mn previously. The data provided little in the way of fresh evidence on the labour market. The US trade deficit narrowed to $79.6bn for June from $84.9bn the previous month as imports declined slightly on the month.

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13:30 US Non farm payrolls.  Previous 372k     Forecast 250k