15/08/2013

Good morning,

European indices took home decent gains following better than expected GDP from the Euro zone, coming out in positive territory for the first time in almost two years. Euro Stoxx took home 0.4% to 2,852.08. In the UK, solid unemployment figures sent the GBP on the bid once again, but Cable still not managing to take out the 200-day SMA at 1.5515. The FTSE lost ground (down 0.4% to 6,587.43)  as the MPC revealed a divided rate outlook, where some members are in favor of a more hawkish stance than the overall message of a relatively dovish MPC. The ILO Unemployment came out at 7.8% as expected, and the MPC has announced that no rate changes will be implemented before an unemployment below 7.0% has been observed. Even though the main figure was unchanged, the underlying components are showing a pick-up in activity which could have a positive impact on the employment figures, should the positive trend continue.

In the US, PPI came out on the soft side reaching the lowest yearly figures in three years for the Core, but no real market reaction. US stocks closed in negative, with major indices down 0.6% on average which followed through in Asia on worrying corporate earnings. JPY advanced, sending USD/JPY lower for the first day in three as sellers have been witnessed at the 50-day SMA.

Today will be interesting for the UK and US. At 08:30GMT, we have the UK July Retail Sales, which are expected to increase 0.7% vs. 0.2% in June on back of a pick-up in general consumption. If we see strong figures, we could see Cable pushing for further upside and test trend resistance projected from the 2013 highs, currently at 1.5560.

The US holds the key today, as the July CPI will be released at 12:30GMT along with the Initial Jobless Claims (exp at 335k vs. 333k prior), the August Empire Manufacturing (exp at 10.0 vs. 9.5 prior) as well as the TIC Flows (exp at -$17.5bn vs. -21.8 prior). Later, at 13:15GMT, the July Industrial Production will be out (exp unchanged at 0.3%) while we have the August NAHB Housing (exp unchanged at 57) along with the August Philly Fed (exp at 15 vs. 19.8 prior) at 14:00GMT.

No doubt it will be a busy day, and with reduced activity from mainland Europe following Ferragosto, we could see some good volatility if the figures surprise the market.