Brexit plan so new, nobody’s seen it
The UK government was reported to have formulated a fresh approach to UK customs relationship with the EU after Brexit. Although there were no details released, and that the Ministry of Brexit has not yet seen it, there were indications of a highly sceptical tone from EU negotiators. There were inevitable tensions ahead of a key cabinet meeting to decide Brexit policy at the end of this week. Sterling secured only a brief advance against the Euro and re-tested 1.3100 against the Dollar, although sellers were unable to push the rate below this level.
The June UK PMI manufacturing index gained marginally to 54.4 for June from a revised 54.3, although business optimism declined to a seven-month low amid trade concerns while input prices increased at the fastest pace for four months.
Bank of England Chief Economist Haldane stated that the bank should bring inflation back to the 2.0% target and not delay too long. There was consolidation near 1.3150 on Tuesday with support from strong oil prices, but unease surrounding risk appetite curbing support with the Euro holding near 0.8850 amid choppy trading across asset classes.
The Euro pared back some of its losses yesterday afternoon on reports that Chancellor Merkel and German interior minister Seehofer have reached a compromise on migration policy, averting the immediate threat of a potential government breakup.
There was a slight downward revision to the final Eurozone PMI manufacturing index, although there were important supply-side pressures and input prices increased at the fastest pace for four months. May unemployment recorded the lowest reading since December 2008.
Today is fairly light in terms of data but we watch for European Central Bank (ECB) Executive Board Member Praet’s speech at 17:00 (UK time) at a Gala Dinner hosted by the National Bank of Romania.
Following Friday’s position adjustment losses, the Dollar secured fresh impetus yesterday, pushing the Euro to test the 1.1600 area. US manufacturing PMIs strengthened to 55.4 for June, conversely, supply-side issues were evident, delivery times lengthened by the largest amount on record and input prices increased sharply and output prices increased at the second-fastest pace since June 2011.
The ISM manufacturing index strengthened to 60.2 from 58.7 previously with the new orders and production components remaining comfortably above 60.0. The pace of order backlogs slowed, but there was a sharp increase in delivery times while the rate of price increases slowed only slightly. The Euro is resilient near 1.1650 and stresses surrounding trade and China maintain choppy trading conditions.
Data to Watch:
05:30 AUD RBA Interest Rate Decision
09:30 GBP PMI Construction (Jun)
14:30 CAD Markit Manufacturing PMI (Jun)
15:00 USD Factory Orders (MoM) (May)
n/a NZD GDT Price Index
17:00 EUR ECB’s Praet Speech