Daily Economic Outlook: 21st July, 2015

It is another light day for new economic data, with the UK public finances for June the only release of note. Recent months have seen indications that the public sector deficit is now starting to fall at a faster than expected rate. The first two months of the current financial year saw lower than expected outturns and, partly as a result of this, the OBR revised down its full year borrowing forecast to £69.5bn in July compared with its March estimate of £75.9bn. Lloyds Bank expects a further improvement in June and  forecast the PSNB ex public sector banks to be around £700mn below the equivalent figure for last June.

Australian Q2 inflation data will be released early Wednesday morning. Inflation has slowed over the last twelve months, despite the depreciation of the Aussie dollar, due in part to the slowdown in the domestic economy. The annual rate of headline inflation in Q1 was toward the bottom end of the RBA's target range, although the core measures were more stable at close to the centre of the range. According to Lloyds Bank, due to higher petrol prices Australian headline rate may picke up in Q2, but the core measures are likely to be little changed. Such an outturn would not preclude further easing by the RBA if this was deemed necessary. In that regard the overnight speech by RBA Governor Stevens will be of interest, particularly any comment he has on exchange rate valuation.