Today’s GDP hints on upcoming UK rate hike

Fundamental Analysis28 July,, Lagos As we stepped into the final week of the month, yesterday’s calendar was quite light. The first high impact news for the week was Germany’s Ifo Business Climate data. The release showed business confidence in Germany improved in July after two consecutive months of drop, according to the survey results on Monday. The agreement between Greece and its creditors have spurred confidence in the region as talks on a third bailout increased optimism at firms in Europe’s largest economy. Ifo’s business climate index, based on a monthly survey of some 7,000 firms, rose to 108.0 from a revised 107.5 in June, beating the Reuters consensus for a reading of 107.2. The Euro rallied across board yesterday as the trend seems to have changed from its recent bearish movement to a bullish outlook.

Euro M3 Money Supply

Also, the Euro M3 Money Supply y/y which shows change in the total quantity of domestic currency in circulation and deposited in banks was released yesterday. According to the ECB report, The annual growth rate of the broad monetary aggregate M3 stood at 5.0% in June 2015, unchanged from the previous period. The annual growth rate of the narrower aggregate M1, which includes currency in circulation and overnight deposits, increased to 11.8% in June, from 11.2% in May. The annual growth rate of loans to households increased to 1.7% in June, from 1.4% in May.

The annual growth rate of loans to non-financial corporations stood at 0.1% in June, unchanged from the previous period.

US Core Durable Goods

From the US, the Core Durable Goods Orders m/m came at 0.8%, better than the forecast of 0.4% as orders for business equipment increased in June for the second time this year as U.S. factories start to regain traction after a weak spell. Bookings for non-military capital goods excluding aircraft climbed 0.9 percent last month after decreasing 0.4 percent in May, Orders for all durable goods — items meant to last at least three years — increased 3.4 percent, propelled by a rebound in the volatile aircraft category. Business investment is projected to improve as the energy industry adjusts to lower prices and companies look to expand, cushioning the hit from cooling foreign economies and a stronger dollar that will probably continue to damp sales of American-made goods.

BoE ready to raise interest rates?

Today, the markets await the Prelim GDP q/q. Economists forecast official figures on Tuesday will show GDP growth bounced back in the second quarter after a new-year slowdown. The result is also expected to spur a debate about when the Bank of England will raise UK interest rates for the first time since the depths of financial crisis. Signs of less worries about the Greek debt crisis and signs of rising living standards, any such recovery in headline growth could fan expectations that the Bank’s policymakers are readying to raise interest rates, perhaps even before the end of the year. The GDP estimate from the Office for National Statistics is expected to get even more attention than usual given recent comments by the Bank governor, Mark Carney, that a hike in borrowing costs may be “moving closer” after more than six years of record low interest rates at 0.5%.

US Consumer Confidence

We also expect the CB Consumer Confidence which will also be closely watched, being a leading financial confidence indicator of consumer spending, which accounts for a majority of overall economic activity. The Survey of about 5,000 households which asks respondents to rate the relative level of current and future economic conditions including labor availability, business conditions, and overall economic situation.

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