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Haldane plays his hand

Haldane plays his hand

GBP
UK government borrowing dropped to an 11-year low of £11.8bn for the first two months of 2018/19. The £3.356bn net borrowing for May was well below expectations of £5.268bn but alas, there was little positive Sterling impact as it slumped further to near 1.3100 against a strong Dollar.

The Bank of England (BoE) held interest rates at 0.50%, but Andy Haldane joined Saunders and McCafferty in voting for an immediate hike, and the market positively re-priced the chances of an August rate hike. The maverick 3 stated that there was little justification in waiting to increase rates. The monetary policy statement revealed a BoE view that first-quarter weakness was transitory and some of the downside risks seen in May had dissipated. The majority were prepared to wait, but market expectations of an August rate hike increased to near 50%, especially with all members agreeing that slack in the economy had largely been used up.

Sterling spiked higher on the split with a move above 1.3200 against the Dollar and 1.1460 against the Euro. The Pound opened this morning above 1.3250 against the Dollar and around 1.1420 against the Euro. The only economic data slated is the BoE Quarterly bulletin.

USD

The US Dollar weakened against a basket of currencies after a surprise fall in the Philadelphia Federal Reserve’s (Fed) index. This saw the Dollar index’s sharpest drop in four years and came amid growing concerns of a US/China trade conflict.

US jobless claims also declined slightly yesterday to 218,000 from 221,000, although the moving average for continuing claims declined to fresh 44-year lows. The June Philadelphia Fed index declined to a 10-month low of 19.9 from 34.4 previously and well below consensus forecasts.

Later today we will see Markit publish its flash figures for the Manufacturing/Services PMI for the current month.

EUR

The Euro is trading up 0.45% at around 1.1655 against the US Dollar after the Eurozone creditors agreed on debt restructuring with Greece ahead of the Eurozone PMI activity data that headlines the European session.

Italian bonds weakened again yesterday morning as Claudio Borghi and Alberto Bagnai, two leading eurosceptics were picked to head important Italian parliamentary committees. Renewed fiscal policy concerns and the threat of clashes with the EU Commission contributed to fresh Euro selling pressure.

Data to watch:

24h USD OPEC meeting
24h EUR EcoFin Meeting
08:30 EUR Markit Manufacturing PMI (Jun)
08:30 EUR Markit Services PMI (Jun)
08:30 EUR Markit PMI Composite (Jun)
09:00 EUR Markit PMI Composite (Jun)
09:00 EUR Markit Services PMI (Jun)
09:00 EUR Markit Manufacturing PMI (Jun)
13:30 CAD Retail Sales (MoM) (Apr)
13:30 CAD Retail Sales ex Autos (MoM) (Apr)
13:30 CAD Consumer Price Index (MoM) (May)
13:30 CAD Consumer Price Index – Core (MoM) (May)
13:30 CAD Consumer Price Index (YoY) (May)
13:30 CAD Bank of Canada Consumer Price Index Core (MoM) (May)
13:30 CAD Bank of Canada Consumer Price Index Core (YoY) (May)
14:45 USD Markit Services PMI (Jun)
14:45 USD Markit PMI Composite (Jun)
18:00 USD Baker Hughes US Oil Rig Count

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