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Johnson still optimistic over trade deal

Johnson still optimistic over trade deal


The final UK PMI services-sector index was unchanged from the flash reading of 47.1 from 29.0 the previous month. The data reinforced a recovery in the services sector, but there will be some concern that there was no evidence of further momentum towards the end of the month. 

Prime Minister Boris Johnson has stated that he is more optimistic than EU Chief Negotiator Barnier over the prospects of a trade deal, but stressed if a deal cannot be reached, other options would be available. Sterling overall has been held in a narrow range against the Euro, settling just below the 1.11 mark before retreating to 1.1060, whilst against the Dollar, sterling pushed up to around 1.2480. Markets will be on alert for briefings and leaks ahead of Chancellor Sunak’s economic statement on Wednesday with reports that there would be a VAT cut for the hospitality sector and a substantial increase in the threshold for paying tax on house purchases.

The debate surrounding negative interest rates also won’t go away with media reports suggesting the Bank of England are preparing the City to make the necessary operational changes, although there were also warnings that it would take up to a year to do so.



The dollar was confined to narrow ranges on Friday with trading volumes sapped by the US market holiday. US equity futures lost ground which also hampered the dollar and it was held around 107.50 as markets also fretted over the increase in US coronavirus cases.

Coronavirus concerns remained a significant feature and US developments remained the principal focus with further increases in new cases, especially in Florida which reported over 10,000 new cases yesterday. The overall number of new US cases slowed although this is likely to have been related to reporting delays during the holiday period.

US equity futures, however, posted strong gains on Monday and Asian equity markets also posted strong gains which underpinned risk appetite.



The Euro-zone PMI services-sector index revised significantly higher to 48.3 in the final June reading from the flash reading of 47.3 and May’s reading of 29.0 which suggests that conditions continued to improve late in the month. The two-month gain was by far the strongest in the survey’s history. The reading for all countries was at a 4-month high as confidence continued to recover, but there was still a further decline in new business. The French index returned to expansion territory for the month.

In comments on Friday, ECB council member Klaas Knot stated that the balance of risks in the economy has become more favourable with recent data solidifying confidence in the bank’s baseline economic scenario. Overall confidence in the Euro-zone recovery remained intact.The Euro was unable however to gain any significant traction as narrow ranges prevailed but edged higher to the 1.1240 area at the market close.

As of writing the Euro trades around the 1.1290 mark against its US counterpart. 


Data to watch

14:00 – USD – ISM Non-Manufacturing PMI

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