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Johnson’s Brexit policy unacceptable

Johnson’s Brexit policy unacceptable


CBI retail sales recovered to -16 for July, up from -42 in June but below forecast and makes it four poor readings in five months. The data maintained market unease over the underlying economic outlook ahead of next week’s Bank of England policy meeting. 

Sterling sentiment was curbed by the Johnson administration’s combative approach to negotiations. EU Chief Negotiator Barnier stated that the UK was attempting to divide EU governments and that demands for the removal of the backstop were unacceptable. EU Commission Chief Jean-Claude Juncker stated that the Withdrawal deal could not be changed. Overall the rhetoric and the new-look UK Cabinet maintained market unease over ‘no-deal’ risks. 

The ECB policy meeting triggered a volatile period with the Euro falling above 1.1235 before a recovery to 1.1185. The Pound pushed above 1.2520 on the Dollar before falling below 1.2450 amid weak sentiment. With Boris seemingly having dealt with the deal renegotiation issue already and no UK data, we’ll be looking to the US data for trading signals.


A modest US Dollar pullback from multi-week lows, primarily led by the post-European Central Bank sharp rebound in the Euro, has lead to a sharp pullback of the EURUSD. 

However, the upbeat release of the US durable goods orders data reaffirmed expectations that the Federal Reserve (Fed) is unlikely to deliver a 50 bps rate cut at its upcoming meeting on July 30-31 and was evident from a strong pickup in the US Treasury bond yields. In turn, this helped limit the USD profit-taking slide and kept a lid on any strong follow-through up-move 

Later during the early North-American session, the first estimate of the US Q2 GDP growth figures might influence the USD price dynamics.


The European Central Bank (ECB) made no changes to its interest rates at their latest policy meeting yesterday. There was a further shift in forward guidance with interest rates expected to remain at current levels or lower at least through the first half of 2020. The bank also reiterated the need for a highly accommodative monetary policy, given inflation had remained well below target for a sustained period of time. 

After a brief rally, the Euro declined sharply to fresh 2019 lows near 1.1100. President Draghi stated that conditions were only getting worse within the manufacturing sector and that the prospects for a stronger second half was diminishing with a slower than expected increase in underlying inflation.

As of writing, the Euro is currently trading at 1.1135 against the Dollar and 0.8957 against the Pound.  


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