GBP UK net lending printed above forecasts, rising to £4.8bn in June from £3.8bn in May and mortgage approvals also printed slightly higher than expected. The Pound saw the briefest of benefit before political fears intensified and Sterling dropped across the board.
Boris reiterated the October 31st “leave” date and there would be ‘no-deal’ if the EU refused to renegotiate. Sterling sentiment deteriorated further with reports that Boris requires the NI Backstop to be removed before he will negotiate with the EU and shrinking confidence amongst MPs that Parliament could prevent a ‘no-deal’ outcome. Markets are wary of the potential for month-end Sterling selling, although there was also caution given the build-up of short positions. Volatility is likely to remain high.
The Euro pushed to 22-month highs past 1.0990 while the Pound plummeted to 28-month lows close to 1.2200 on the Dollar. Selling accelerated in overnight with lows around 1.2120 against the Dollar while the Euro peaked near 1.0870.
Ahead of tomorrow’s Federal Reserve (Fed) policy decision, President Trump continued his attack with comments that the central bank had tightened too much and not likely to cut enough which implied that he expected only a small reduction in rates.
Former Fed Chair Yellen backed the case for a 0.25% cut in rates at Wednesday’s meeting and the market consensus remained convinced that there would be a 25 basis-point cut with a measured tone on forward guidance.
The dollar was unable to gain much traction in New York and against the Euro, edged higher to 1.1150 after finding support above the 1.1100 level. The Dollar has made headway against Sterling due to a fall in the value of the Pound, trading around 1.2175 this morning.
The Euro is fading yesterday’s gains and is now taking the Dollar to the 1.1135 - 1.1140 region. The pair is prolonging the choppy climate in the lower part of the recent range amidst the continuation of the buying bias in the Dollar and the German yields trading near record lows.
As things currently stand, occasional bullish attempts are expected to be short-lived against the backdrop of firm expectations of further easing by the ECB and In the very near term, the Euro is expected to come under pressure as tomorrow’s FOMC event could be less dovish that initially estimated, supporting further the rally in the buck.
On the docket today, the German Business Climate tracked by GfK matched forecasts at 9.7 from 9.8 for the month of August while French advanced GDP figures stated the economy is expected to expand at a quarterly 0.2%.
Later in the day, Consumer Confidence and Business Climate are due ahead of key flash inflation figures in Germany.
Posted in Daily Market News on Jul 30 2019