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Merkel: 30 Days and counting!

Merkel: 30 Days and counting!


UK government borrowing figures revealed a budget surplus of £1.3bn in June, significantly less than last year, and the deficit since April increased to £16.0bn from £10.0bn as spending increased and revenue growth slowed. Sterling slipped after comments by a French official that a ‘no-deal’ Brexit should be presumed given Prime Minister Johnson’s view on the Irish backstop. President Macron also reiterated that the deal could not be re-opened. German Chancellor Merkel stated that solving the Irish border issue will negate the need for the backstop, a Brexit deal would be welcomed but Germany is ready for anything and also challenged Boris Johnson to solve the Irish border within 30 days. 

Sterling lost ground overall with the Euro around 1.0940 and the Dollar below 1.2150 before gaining further at 1.2120. Boris Johnson will meet with French President Macron today and given previous comments, it seems unlikely to generate Sterling positive headlines.


US existing home sales recovered 2.5% for July to an annual rate of 5.42mn which was close to consensus forecasts. Overall, very narrow ranges prevailed into the European close with the dollar edging lower while the Euro consolidated close to 1.1100. 

According to the minutes from the July Federal Reserve meeting, two members would have preferred a 0.50% cut in interest rates rather than 0.25% in order to address low inflation. In contrast, several members wanted to maintain unchanged rates, illustrating underlying divisions within the committee. There were underlying concerns over risks emanating from trade developments and the global economic outlook with low inflation cited as a justification for the move. Those members favouring a cut cited the move as a recalibration of policy stance or a mid-cycle adjustment in response to recent outlook changes rather than the start of an easing cycle. The minutes also reiterated that there was no pre-set course for policy. Markets were slightly more cautious over the possibility of aggressive rate cuts and the dollar edged higher. The US currency held firm on Thursday ahead of the Euro-zone PMI data.


The bearish mood around the Euro against the Dollar seems to be gathering pace in the second half of the week, with session lows of 1.1070 being the probed area. The pair is trading within the negative territory for the second successive session.

Italian politics should continue to limit occasional and serious bullish attempts in combination with increasing expectations of extra easing by the ECB at next month’s meeting.

On the European docket today, French and German Services and Manufacturing PMI data  has already been released and come in above expectations alongside Eurozone Markit advanced PMI readings out slightly after. As of writing, the EUR/USD is currently trading at 1.0931. 



Data to watch

08.15 EUR – French Flash

EUR – French Flash Manufacturing PMI

08.30 EUR – German Flash Services PMI

          EUR – German Flash Manufacturing PMI

09.00 EUR – Flash Services PMI

          EUR – Flash Manufacturing PMI

12.30 EUR – ECB Monetary Policy Meeting Accounts

14.45 USD – Flash Manufacturing PMI 

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