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The Market Last Week

Global equity markets ended the week on a negative footing, as mounting geopolitical concerns between the US and North Korea weighed on investor sentiment. UK markets closed in the red last week, weighed down by losses in commodity related stocks. In economic news, RICS housing price balance advanced at a slower-than-expected pace in July while BRC like-for-like retail sales rose more-than-expected on an annual basis in July. Meanwhile, the nation’s monthly manufacturing production recorded a flat reading, in line with expectations in June, while industrial production rebounded more than market anticipations in the same month, led by a rise in oil and gas output. European markets painted a negative picture for the week, amid a decline in banking sector stocks. On the macro front, Eurozone’s Sentix investor confidence for August recorded a drop to its weakest level in 3 months. Additionally, Germany’s industrial production surprisingly eased on a monthly basis in June. US markets ended the week in negative territory, as geopolitical tensions increased between the US and North Korea after the two nations engaged in verbal threats. On the data front, the number of Americans applying for unemployment benefits surprisingly rose for the week ended 4 August 2017. Meanwhile, consumer price inflation in the US advanced less-than-expected on a yearly basis in July. Asian markets closed weaker in the previous week. On the macro front, China’s exports and imports recorded a less-than-anticipated rise in July, raising concerns over global demand.

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Currency Update

The Euro ended stronger against the greenback. In macroeconomic news, Germany’s trade surplus widened more than market expectations in June while consumer price index (CPI) advanced at par with the market forecast in July. The GBP ended in the bearish territory against the USD, following the latest reports of controversy surrounding the Brexit payment for leaving the European Union. Moreover, UK’s total trade deficit unexpectedly widened in June, reaching its highest level in 9 months, as imports increased and exports decreased. Separately, UK’s NIESR estimated GDP grew less than market expectations during the May-July 2017 period. The USD ended mixed against its major counterparts after an upbeat JOLTS job openings report increased expectations that the US Federal Reserve (Fed) could hike interest rates. Meanwhile, wholesale inventories recorded an unexpected rise in June.

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Donald Trump in war of words with North Korea; James Bullard suggests dovish stance for Fed

As tensions between the US and North Korea have intensified, the US President, Donald Trump threatened North Korea with “fire and fury” while boasting that US military was locked and loaded if North Korea acted on its plans to attack the Pacific US territory of Guam – where around 7,000 military personnel and 160,000 US citizens live. Separately, St. Louis Fed President, James Bullard, stated that the central bank can leave interest rates where they are for now, as inflation is not likely to rise much even if the US job market continues to improve.

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The Week Ahead

Going ahead this week, traders will keep a close watch on the FOMC meeting minutes and the European Central Bank monetary policy meeting for further cues. Furthermore, German and Eurozone GDP and UK CPI and ILO unemployment rate along with US retail sales and Michigan consumer confidence index will be on investors’ radar.

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