The pound is mixed this morning, gaining against the broadly weaker euro, but consolidating against the dollar as falling stock markets sapped demand for riskier assets. The MSCI Asia Pacific Index of shares dropped more than 1% during the overnight trade, while FTSE100 started the week 1.2% lower. There are no economic releases or public speeches scheduled for today. Looking to the week ahead, consumer and retail price data for June headline the economic calendar, highlighting the latest development on economic growth and course of inflation. CPI gauge is expected to remain unchanged at 0.2% from previous month, with headline figure enduring at 4.5%. The trade balance report for May is also due out this week, with trade gap projected to widen marginally.
The euro dropped across the board this morning on concern that European sovereign debt crisis is spreading beyond Greece and Portugal. The single currency continued with its downtrend from last week when Moody’s Investor Service downgraded Portugal to below investment grade, on speculations that ECB is going to expand its aid fund on Italy. The ECB officials said that Europan bailout fund may have to be doubled to 1.5 trillion euro to cover the Italian crisis. Looking to the week ahead, Eurozone inflation figures and industrial production headline the economic calendar, with the expectations for the overall inflation reading to remain steady 1.5%. Also scheduled for this week is the Euro-region trade balance report, with the expectations for the trade gap to enlarge from previous month.
The dollar gained against most of its major rivals during the Asian session as investors run for safety of the US currency on signs that the global economic recovery is loosing steam. European debt crisis and decline of global indices persuaded market participants to go for greenback instead for some riskier assets. Traders will pay close attention to Federal Reserve’s Minutes release on Tuesday and look for any clues regarding the medium term strategy on monetary policy. Also scheduled for this week are the CPI and retail sales figures, with the expectations for the inflation to remain subdued in US.
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