UK Housing Market Cool Off and Labour Victory

At 7:00 AM, the Halifax House Prices recorded a decrease of 0.2 percent in June, which was a bigger drop than the expected increase of 0.2 percent and the previous month’s 0%. This reflects some cooling off in the UK housing market.

Eurozone Retail Sales will be released at 10:00 AM for May, with a forecast of 0.1% against the previous month’s 0%. This data is an insight into consumer spending trends in the Eurozone.

US Nonfarm Payrolls will be published at 13:30. They are expected to hit 190K and previously stood at 272K, meaning a slowdown in job creation.

The Unemployment Rate for June in Canada will be published at 13:30. A minor weakening from 6.2% to 6.3% is expected in this rate. The number will help in assessing the health of the labour market in Canada.

Labour won the UK election to herald a dramatic shift in the political scene that will have ramifications for future economic policy. Britain’s Labour Party won 410 seats in parliament. This has given Labour an approximate 170-seat majority, thereby stamping out 14 years of Conservative-led governance.

FX Markets Overview

The forex markets have been a hive of activity so far today, with some of the busiest trading taking place on some of the major currency pairs. As always, activity in the US Dollar (USD) continues to captivate the market, with recent economic data combined with geo-political developments, proving to be the market driver.

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USD/JPY: The Japanese Yen (JPY) gained ground slightly today as USD/JPY backed away from the intervention threshold and traded closer to 160.66. Recent intervention by the Bank of Japan and evidence of increased intervention continue to make this pair one of the highest in terms of volatility (FT Markets) (OANDA).

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GBP/USD: The British Pound appears to be firming up against the USD, especially in light of the UK election outcome and the choices being made constantly on economic policy. As of now, GBP/USD is trading at around the 1.2772 mark and so far has remained relatively flat when compared to the previous day’s close ​(DailyFX)​.

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EUR/USD: The euro appears to be quite stable against the US dollar at around 1.0823. This steadiness comes after mixed signals on the economy from Eurozone and US economic data that kept traders cautious​ (DailyFX)​.

Best and Worst Performers

Up by 0.39 percent, as of the start of London trading, the Japanese Yen is dominating currency rankings. The Swiss Franc is next in line, up 0.16 percent. Showing minimal gains, the Canadian Dollar is the worst performer, up 0.05%. (DailyFX)​.

Economic News and Key Drivers

US Economic Data: Recent US economic peripherals, among them the ISM services PMI and ADP employment data, have been rather lackluster, and increased the odds of changes in the US Treasury yield curves. These data points have left the USD tentative at best​ (OANDA)​.

UK General Election Results: Markedly, only faint ripples have been sent through the markets by the UK election results. The main focus remains on monetary policy, which at the present time will likely be unaffected by the election results, which has helped infuse some relative stability into the price of the GBP (DailyFX)​​ (OANDA)​.

Japanese Yen Intervention: Speculation in the market on the probability of an intervention by the Bank of Japan continues. Playing in concert with this theme are market participants who have kept alert for any such noises by officials that might indicate the possibility of official intervention in order to try and stabilize the Yen (FX Markets)​.

Other key upcoming data are in the CHF/USD pair, with figures for Swiss inflation that were on watch, as it could be directional on a CHF, with traders looking for any signs that would prompt a policy response from the Swiss National Bank. (OANDA)​.