Brexit deadline slips and US GDP in focus
Sterling slumbered through most of yesterday following the Bank Holiday weekend. With no UK economic data, underlying concerns continued to sap confidence. The Evening Standard reported that Bank of England Governor Mark Carney had been asked to extend his term of office to 2020. The Treasury department denied the report and confirmed job adverts for the role would be advertised in due course; Sterling dipped on the thought of a change of leadership.
The Euro pushed to 12-month highs, peaking at 1.0992, and Sterling failed to hold above the 1.2900 level against the Dollar amid weak sentiment. The low market liquidity this week also meant investors were wary of month-end Sterling selling.
Overnight, BRC data recorded a 0.1% increase in shop prices in the year to August, the first annual increase since 2013 as food prices increased, which will add pressure to the CPI inflation rate. Further reports that a UK-EU Brexit deal was unlikely to be agreed until mid-November limits positivity around Sterling.
Overnight, we’ve seen renewed weakness around the buck over continued and growing trade issues with China. Similarly, ahead of the USQ2 GDP release later, we’ve seen traders sell out their positions, which has led to a short-term fall in the value of the Dollar.
The US goods trade balance widened to a 5-month high of $72.2bn for July from $67.9bn the previous month, as exports declined last month and imports increased. Consumer confidence strengthened to 133.4 for August, from a revised 127.9 previously, the highest reading since October 2000 and well above forecasts amid confidence in the labour market.
An uptick in the US Q2 GDP growth figures could very easily lift the sentiment around the Dollar. Besides, the US PCE inflation and July pending home sales data will also have a significant impact on the Dollar trades.
The Euro reached a 4-week high vs. the Dollar yesterday, peaking at 1.1730, with Italian ministers saying they will not cross the 3% threshold of GDP deficit limit. However, this morning, after a US recovery, and reports that Italy has demonstrated a desire to continue ECB bond buying next year, we have dropped back to around the 1.1675 mark.
There were reports that Germany was going to offer financial support to Turkey, but the government denied direct aid was being muted. Private loans growth remained at 3%, but Eurozone money supply growth contracted to 4% hindering the Euro slightly.
Data is in very short supply today in the Eurozone, the only news being the German consumer confidence survey, French GDP and consumer spending figures, and the Swiss ZEW Survey – none of which are expected to send shockwaves through the market.