Football fuels GBP
The UK PM Theresa May survived another battle following the resignation of her Foreign Secretary on Monday.
GBP was a top performing currency on the day yesterday as investors seemed to focus on the latest economic data instead of politics. May manufacturing production gains were held to 0.4% following a revised 1.3% decline previously and industrial output registered a second successive decline. New monthly GDP data recorded a 0.3% May increase, in line with consensus forecasts, to give a year-on-year increase of 1.5%, but weaker than expected industrial data reversed Sterling gains. The latest new GDP estimate indicated that the economy is growing, driven mainly by the services sector. This has again fuelled expectations that the Bank of England (BoE) will hike its rate at its next meeting in August.
On a slight side note, it is worth mentioning England’s World Cup success amalgamated with the heatwave is helping the UK economy bounce back from the slowdown triggered by the Brexit vote as well as heavy snowfall earlier this year, according to economists.
Market participants look forward to the BoE Governor Mark Carney’s scheduled speech, about the global financial crisis at the National Bureau of Economic Research conference, for some fresh impetus.
The Greenback gathered momentum yesterday, trading higher across the board during the morning session. After the political drama of yesterday, the British Pound is the only currency trading higher against the USD.
The US NFIB small business confidence index declined slightly to 107.2 for June from 107.8 previously. Labour markets remained tight with further skills shortages and upward pressure on wages, although there was an easing of upward pressure on prices within the survey. The JOLTS job-openings data recorded a decline to 6.64mn for May from a revised 6.84mn the previous month and below consensus forecasts, although this was still a very strong figure historically and the number of hires comfortably exceeded the number of layoffs with confidence in the economy underpinning the dollar.
Meanwhile, escalating trade war fears, following the Trump administration’s latest threat to levy a tariff on additional $200 billion worth of Chinese goods, might weigh on investors’ sentiment and further collaborate towards keeping a lid on any meaningful up-move for Greenback.
The day remains light in terms of data. Headline risks surrounding the NATO meeting could be a main driver.
The Germans are feeling less optimistic as we saw the ZEW Indicator of Economic Sentiment dropping to its lowest level since August 2012. The index was minus 24.7 points in July.
There were comments from Italian European Affairs Minister Savona that it may depend on other countries whether Italy stays in the Euro and that the country needed to be ready for all eventualities. Italian yields moved higher following the comments and the Euro briefly dipped lower amid fears surrounding underlying policy tensions.
Political uncertainty and escalation of international trade war have diminished the economic outlook for Europe and hence the Euro slipped 0.3% to trade near the 1.17 handle.
Looking ahead, European Central Bank’s (ECB) M.Draghi, Y.Mersch, P.Praet and D.Nouy are due to speak in an ECB event.
Data to watch:
07:00 EUR Non-monetary policy’s ECB meeting
All day EUR 10-y Bond Auction
12:30 USD Producer Price Index ex Food & Energy (YoY) (Jun)
14:00 CAD BoC Rate Statement
14:00 CAD BoC Interest Rate Decision
15:00 CAD Bank of Canada Monetary Policy Report
15:15 CAD BoC Press Conference
15:35 GBP BOE’s Governor Carney speech
20:30 USD FOMC Member Williams speech