Gove: It’s up to EU!
Michael Gove, the minister without portfolio insisted that the EU include the NI Backstop in any negotiations or face a “no-deal” scenario. Markets remained fraught and tensions will inevitably increase ahead of the G7 meeting in France and the end of August.
A cross-party group of MPs launched legal action to prevent the suspension of Parliament, principally aimed at preventing a no-deal by default. Irish PM Leo Varadkar’s offer to discuss alternative arrangements provided only marginal relief to the Pound.
Global trade fears also unsettled Sterling, although this was offset by expectations of very dovish (interest rate cutting) stances by major central banks. The Pound failed to hold above 1.2200, falling to near 1.2150 against the Dollar and the Euro found support above 1.0930 and risk aversion pushed it back below 1.0870.
US San Francisco Federal Reserve (Fed) President Daly stated that global headwinds justified last week’s rate cut. She also stated that continued trade headwinds and lower rates from other central banks could justify further cuts, but aggressive action would not be warranted without evidence of a stronger economic downturn.
Economic data was sparse with the JOLTS job-openings data recording a small in June job openings to 7.35mn from an upwardly-revised 7.38mn the previous month. White House Trade Adviser Navarro called on the Fed to cut interest rates by at least another 75 basis points by the end of 2019. St Louis Fed President Bullard stated that he wanted to take stock about how the accommodation put in place has an impact and he warned against knee-jerk reactions to trade headlines. He also stated that he would like to ease policy more to raise inflation and the Fed would have to look at incoming data before deciding whether to cut rates in September.
Overall market expectations of further rate cuts this year increased slightly further which undermined the dollar. The Euro drifted to near 1.1170 before a gradual recovery as the dollar drifted lower and traded just above 1.1200.
The Euro against the Dollar failed to close above 1.1220 yesterday and currently, as writing, is trading just under 1.1200. The currency pair picked up earlier this week as markets began pricing in the prospects of aggressive easing by the US Federal Reserve, due to continuing trade tensions between the US and China.
German Industrial Production data, which has already been released fell -1.5% compared to a consensus reading of -0.5% and a previous month’s reading of 0.1%. The miss could possibly see the EUR/USD fall to in and around Tuesday’s low of 1.1167 over the coming days, further bolstering dovish expectations from the European Central Bank.
Data to watch
07.00 – German Industrial Production
14.30 – FOMC member Evans speaks