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The Market Last Week

Global equity markets ended in the positive territory last week, as traders bet on a strong earnings season. UK markets rose last week, with the benchmark FTSE 100 ending the week higher, amid gains in commodity sector stocks. On the macro front, UK’s ILO unemployment rate surprisingly eased to its lowest level since 1975 in the March-May 2017 period. Meanwhile, the British Government published a draft Bill which will formally end the UK’s membership with the European Union. European markets painted a positive picture last week, driven by gains in mining sector stocks. In economic news, Eurozone’s industrial production rose more-than-expected on a monthly basis in May, notching its strongest level in 6 months. Moreover, Germany’s trade surplus widened at par with the market forecast in May while the final consumer price inflation also advanced in line with market expectations on a yearly basis in June. US markets ended in green for the week, after the Federal Reserve signaled a gradual rise in interest rates in future. On the data front, US consumer price index (CPI) rose less than market expectations on an annual basis in June. Manufacturing production bounced back into positive territory on a monthly basis in June. Additionally, industrial production rose higher-than-expected in the same month, led by a rise in mining and oil & gas output. Asian markets ended higher last week, tracking gains on Wall Street. Data indicated that China’s CPI advanced as expected on an annual basis and trade balance widened more than market expectations in June.

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Currency Update

The EUR ended firmer against the USD, following buoyant economic releases in the Eurozone and Germany. The Pound finished in the positive territory against the greenback, after Bank of England (BoE) official, Ian McCafferty, stated that the central bank should consider unwinding its £435.0 billion quantitative easing program earlier than planned. Moreover, the GBP was supported by the unemployment rate which notched its lowest level in 42 years. Meanwhile, average weekly earnings rose in line with expectations in 3 months to May. The USD ended weaker against its major counterparts after US retail sales surprisingly eased on a monthly basis in June, led by a downfall in sales at gas stations, clothing stores, supermarkets, restaurants, book stores and sporting-goods stores. Moreover, the preliminary Reuters/Michigan consumer confidence index dropped more-than-expected in July.

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Yellen says US economic growth warrant gradual rate hikes, while Fed’s Beige book indicated a “slight to moderate” growth in June…

The Federal Reserve Chairwoman, Janet Yellen, in her testimony to Congress, indicated that the American economy is healthy enough for Fed to take a step ahead to hike interest rates and start reducing its massive bond portfolio highlighting the strength in job growth, but added that the central bank was scrutinizing weakness in inflation and a low neutral rate that may leave the Fed with diminished leeway. Meanwhile, Fed’s Beige Book report indicated that economic activity expanded across all twelve districts in June, with the pace of growth ranging from slight to moderate. Moreover, it pointed towards a tightening labour market for both low and high-skilled positions, increased demand for IT services and robust manufacturing activity. Moreover, employment across most of the nation maintained a modest to moderate pace of expansion.

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The Week Ahead

Going ahead this week, investors’ will keep a tab on the BoE Governor, Mark Carney’s speech along with the Bank of Japan and the European Central Bank’s (ECB) interest rate decision for further cues. Meanwhile, the ECB monetary policy statement along with inflation reports from the the UK and the Eurozone would be on investors radar.

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