Immigration first, then Brexit
Despite a dearth of domestic influences, Sterling recovered from early weakness to a net recovery against the Dollar. The Euro strengthened to test resistance above 1.1360 as benchmark UK 10-year bond yields edged slightly lower relative to German Bunds. The sharp decline in the equity markets and a fragile risk appetite generally significantly limited Sterling support, especially with oil prices receding.
Political considerations remain significant amid expectations that the government will likely be criticised for its lack of progress on “The Border Issue”, making for a bruising EU Summit later this week. That said, reports from the EU suggest that immigration will top the bill.
The Euro held above 1.1360 on market open and the Pound edged towards 1.3300 against the relatively fragile Dollar. This morning, new Bank of England (BoE) member Jonathan Haskel, who is replacing McCafferty at the BoE policy committee, will be closely watched to see whether he gives any indications of his monetary policy stance.
The US Dollar continues to lose ground to the safe-haven of the Japanese Yen as investors worry about the potential impact of protracted discussions over NAFTA and worldwide tariffs being implemented by the Trump government. The focus for the Dollar will be the GDP growth number due to be released on Thursday.
The Chicago Fed National activity index declined sharply yesterday to -0.15 for May from a revised 0.42 the previous month, primarily due to the impact of a decline in manufacturing production while the employment contribution remained positive. New home sales increased 6.7% in May to an annual rate of 0.69mn from 0.65mn previously and above consensus forecasts of 0.67mn. The Dallas Fed manufacturing index strengthened to 36.5 for June from 26.8 with notable upward pressure on wage and prices as the strength in oil prices boosted the regional economy.
Later during the early North-American session, the release of Conference Board’s US consumer confidence index will also be looked upon for some short-term trading opportunities.
The German IFO business climate index declined to 101.8 for June; further declines in the current conditions index were offset by a limited recovery in expectations. IFO economists remained cautious over the German outlook with comments that “boom times were over” amid concerns surrounding global trade developments.
European Central Bank (ECB) member Vitas Vasiliauskas stated that “further policy steps” could be considered in Autumn 2019. Italian bonds weakened further, although the impact was limited with market attention focussed elsewhere.
Data to watch:
03:20 EUR ECB Cœuré Speech
10:00 GBP MPC member Haskel speech
10:30 GBP MPC Member McCafferty speech
14:00 USD S&P/Case-Shiller Home Price Indices (YoY)
18:00 USD FOMC Member Bostic speech
18:45 USD FOMC Member Kaplan Speech
23:45 NZD Trade Balance (MoM) (May)
23:45 NZD Trade Balance (YoY) (May)
23:45 NZD Exports (May)
23:45 NZD Imports (May)