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Bank of Japan Could Assess New Economic Support Measures

According to data published yesterday, the amount of June retail sales in the US fell by 0.3% in comparison with the figures from May (forecasted growth in the indicator by 0.2%). Th retail sales without taking into consideration sales of cars also fell by 0.1% in June (forecasted 0.7% growth). These numbers say something about the strength, or rather, lack of demand within the US.

Today the Greek prime minister, Tsipras, will hold a parliamentary vote on whether to agree to the country’s creditors’ reform demands. Getting them to agree will not be an easy feat and could end in tears. If he doesn’t manage it, the country is threatened with early elections and a dragging out of this Greek saga. Moreover, the politician seems like he’s having a hard time convincing even himself as to whether the reforms will work. What is clear though is that the majority of difficulties lie ahead. News from Greece is still rattling market nerves. The euro/dollar pair is trading at 1.1016 in expectance of a conclusion to negotiations in the parliament coupled with a speech from Yellen.

According to GDP data, the Chinese economy grew by 7% in the second quarter in comparison with the same period last year. It was expected that the economy would grow by 6.8%. Industrial production in the country grew by 6.8% against May’s 6.1% and an expected 6%. Retail sales in June also increased in the country by 10.6%, up by 0.5% on May’s 10.1% whilst they were only expected to reach 10.2%. Growth in investment expenditure across the main stock markets in China is at 11.4% from the start of the year, against the expectation of a fall to 11.2%.

Sales of housing in China in the first half of 2015 have grown by 12.9% in comparison with 2014, having sped up by 5.1% in the first 5 months of this year. Credit costs being down, along with stock market growth and a relaxing of credit policy in the provision of mortgages, has nudged up the demand for housing. On the whole, investors still have their eye on the situation in China, as do world markets. Today’s set of statistics have given cause for optimism.

Today the Bank of China convened and the result of which was a decision to leave monetary policy unchanged. According to recent forecasts from the regulator, for the year ending March 2016, the key inflation indicator should stand at 0.7%. As such, the forecast for the current financial year was dropped in comparison to April’s forecast which suggested a 0.8% growth in the base index for consumer prices. The Bank of Japan has now dropped this year’s forecast for the fourth quarter in a row. It started to do it in October and back then it was decided that they would start buying up assets totaling 80 trillion yen per year. The inflation forecasts for the next two years have been reduced to 1.9% and 1.8% respectively.

Furthermore, the Bank of Japan has reduced its economic growth forecast for this year to 1.7% from 2.0% and this is the second quarter in a row that they have done this. The central bank still believes that, the year ending 17th March, the economy will have grown by 1.5% and by 0.2% in the following year.

At today’s meeting, the Bank of Japan saw 8 votes against one for leaving the asset purchase price level unchanged (as the market expected). Over the next few months, the need for new measures could become greater if inflation doesn’t meet the bank’s forecasted level. The yen didn’t flinch on news of today’s decision.

Today some disappointing labour market data came out of the UK. The number of unemployment benefit applications in June rose by 7,000 against an expected fall of 10,000. The average salary in the country from March to May increased by 2.8% although it was expected to see a rise of 3%. Simultaneously, wages per week including bonuses and other payments rose by 3.2% in comparison with the same period last year. This is the largest rise for the past 5 years. The unemployment level in the country rose to 5.6% from 5.5% over the period of February to April.

The pound lost its position on this weak labour market data. The pound/dollar fell to 1.5615 and the euro/pound grew to 0.7066.

Today it’s worth taking a glance at the US’ producer price index and data on oil reserves from the country’s ministry for energy. The Bank of Canada is due to convene and they should make a decision regarding the base rate for the country. Janet Yellen, the head of the US Fed, giving a speech before Congress convenes today and tomorrow is the event that really catches the eye.

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