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Bumper Queen’s Speech could claim a scalp

Bumper Queen’s Speech could claim a scalp

The Bank of England’s Mark Carney stated that anaemic wage growth and mixed signals on consumer spending and business investment meant “now was not the time to raise interest rates”. The dovish rhetoric undermined Sterling as it countered speculation triggered by last week’s 5-3 interest rate vote. Carney also stated that domestic inflationary pressure was still subdued and that Brexit is likely to make people poorer. Carney also wanted to see the extent to which weaker consumption growth is offset by other components of demand, whether wages begin to firm, and how the economy reacts to tighter financial conditions.

Sterling came under sharp selling pressure following the comments, with a decline to near 1.2650 against the Dollar as the Euro moved above the 1.1365 resistance area. Further bad news arrived as Standard & Poor’s warned that the UK credit rating was likely to be downgraded.

The Queen’s speech seems unlikely to reveal a coalition agreement, and the political uncertainty means Theresa May could face a leadership challenge or worse if outvoted.


Overall, there was a lack of tier one economic data, which maintained relatively narrow trading ranges. The US current account deficit widened to $117bn for the first quarter of 2017 from $114bn the previous quarter, although the deficit was lower than expected.

Chicago Fed President Charles Evans reiterated that the Fed could wait until December before raising interest rates further, while there could be a quick move to start shrinking the balance sheet. Dallas Fed head Kaplan repeated that patience was required in raising rates further.

Today’s US existing home sales data will have a significant impact on sentiment after the weak housing data released last week.


The Eurozone current account surplus declined in April to EUR 22.2bn, from EUR 35.7bn in March. The decline was mainly centred on services, although there was still a 12-month surplus of over 3.0% of GDP. The sustained US deficit and Eurozone surplus illustrate the potential for medium-term Euro strength against the Dollar, although the data had no immediate market impact.

The Euro, overall, continued to lose ground with a paring of long positions as existing bond yield spreads undermined the currency. Overall, there was a single-currency retreat to 3-week lows around 1.1120 against the Dollar late in the European session and consolidated just above this level.

Data To Watch: 

8:00am EUR Non Monetary Policy’s ECB Meeting. 
9:30am GBP Public Sector Net Borrowing (May), 
12:00pm MPC Member Haldane Speech

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