UK House Prices Plunge; Inflation and Jobs Data Loom

UK Housing Market:

Yesterday, According to Nationwide Building Society data, house prices in the UK are down 0.5% for June, a third time in a row. The annual increase rate has fallen to 1.2%, the lowest value since early 2021. Mounting interest rates and squeezed households were pointed to as some of the major factors impacting the upturn.

European Data:

At 10:00 AM, it will release the Inflation Rate of the Eurozone for June. The prior figure was 2.6%, with the consensus and the forecast both at 2.5%. This will give a better scenario of the current trend of inflation taking place in the Eurozone.

Given simultaneously will be the announcement of the Eurozone unemployment rate for May. The consensus comes in flat at 6.4%, while a slight uptick to 6.5% is considered the forecast. Stability or changes in the unemployment rate can severely affect market sentiment and economic policy decisions.

Speeches from Central Bank Leaders:

This afternoon, European Central Bank President Christine Lagarde and Federal Reserve Chair Jerome Powell will both appear on a panel about monetary policy at the ECB Forum on Central Banking in Sintra, Portugal. They will be joined by the governor of Brazil’s central bank, Roberto Campos Neto. Investors are eyeing this for future policy directions from some of the world’s most influential central bankers.

FX Markets Overview:

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The U.S. Dollar is finds strength against major currencies, mostly resulting from strong manufacturing data earlier this morning. USD/JPY is trading around 161.65 after opening .5% higher compared to yesterday’s close. This uptick can be attributed to the fact that the ISM Manufacturing PMI came in higher than expected at 52.8 above the forecast of 51.5.

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The euro is under pressure, slipping 0.3% to 1.0730 against the USD, after weaker-than-anticipated inflation data came out of Germany, which implanted some doubt in the markets with respect to further interest rate hikes by the European Central Bank.

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Meanwhile, the British Pound is relatively stable against the USD at 1.2630, while investors exercise caution ahead of a monetary policy meeting by the Bank of England later in the week, at which policymakers are expected to give direction on forthcoming rate decisions.

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The Australian dollar rose to 0.6680 against the USD in the wake of strong retail sales data released this morning and due to positive sentiment from the latest move by China to support its economy.

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The CAD has, however, remained a little soft at 1.3250 against the USD due to volatile oil price action following persistent supply concerns.

Other Economic News

US Manufacturing Sector:

The US manufacturing sector checked in resiliently with the ISM Manufacturing PMI going up to 52.8 in June from 51.0 in May, now at its highest reading in six months, indicating expansion in the sector. Key components, like new orders and production, have improved significantly, suggesting a strong outlook for the next few months.

Eurozone inflation:

Germany’s June reading for inflation came in at 4.1%, against 4.5% the previous month and an expected reading of 4.3%. The unexpected dip raises the question of whether this is a mere blip on the overall upward trajectory of Eurozone inflation or whether it is a sign of more lastingly lower price pressures, raising questions about the ECB’s expectations to hit its inflation target. For now, market participants will be watching closely what the reactions—of the central bank—will be.

China’s Economic Stimulus Package:

What could be a clear bid to drive economic growth, China is likely to come up with the declaration of arrays of stimulus measures, slashing taxes and increasing spending on infrastructure, to offset the slowdown in its manufacturing sector and prop up domestic consumption. The news has been hailed by the global markets, showing its obvious effects on the commodity currencies like AUD.

Crude Oil Prices:

Crude oil prices remain volatile, staying near $75 per barrel for Brent. In the market, tensions in the Middle East weigh against concerns that could be harbingers of eventual supply disruptions. They are estimating negative effects from ongoing production cuts by OPEC+ nations. Investors are eyeing expectations coming out of US inventory data for more signals on supply-demand dynamics.

Global Equities:

Today, markets in equities remain mixed. Boosted by encouraging economic data, US indices are edging higher, while their European peers are under pressure following weaker inflation figures out of the region. On optimism pinned to China’s stimulus measures, Asian markets closed positive.