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The daily outlook

Sterling surges on

Sterling received another boost this morning after a leading think-tank announced that Britain will avoid a double-dip recession and its economy will expand at trend growth rates as early as 2012. In the latest forecast from the National Institute for Economic and Social Research (Niesr), it predicts GDP growth of 1.3% this year, 1.7% next year and 2.2% in 2012. The news follows recent strong economic data over the past week where GDP and retail sales figures shocked the market on the upside. The pound has surged to 5 month highs against the dollar and the general consensus is Sterling will continue on a long term rise against the Greenback. Merv “the swerve” King will be speaking today and as usual, I’d expect “doom and gloom” comments from the BoE chief. Most likely on his radar will be the GDP figures from Q2 which showed a rise of 1.1% QoQ (0.6% forecast).

The euro has risen against both the dollar and the yen once more this morning as improving demand for riskier assets continues to push European equities higher. The single currency remains near its strongest level against the dollar in more than two months after European stocks climbed. Eurozone M3 money supply rose by 0.2% Y/Y versus expectations for a 0.1% decline.

The Australian dollar dropped by the most in more than a week overnight as a government report showed consumer prices increased at a slower pace than economists had forecast, giving the central bank scope to keep rates unchanged in August. The Aussie slid against all 16 of its most- traded counterparts as traders cut to zero the likelihood that Australia’s central bank will increase its key rate when policy makers meet on August 3rd. New Zealand’s currency also ended a four-day winning streak versus the yen as a report showed business confidence declined in July.

Today, the economic calendar contains the US durable goods orders and German CPI inflation data. The Reserve Bank of New Zealand will also decide on rates whilst the ECB publishes its Bank Lending Survey and the Fed will publish its Beige Book.