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No Summer Hols for MP’s

No Summer Hols for MP’s


June’s retail sales bucked the recent poor data trend, beating forecasts of contraction by growing 1.0% on the previous month. Year-on-year retail sales growth strengthened to 3.8% from 2.2% and the positivity enabled Sterling to claw back more ground on its peers. Brexit concerns remained in focus after the Office of Budget Responsibility (OBR) warned that any ‘no-deal’ Brexit outcome was likely to trigger a recession and a 2% drop in GDP. 

The House of Commons passed an amendment which would make prorogation (suspending) Parliament more difficult in the lead up to the October 31st. EU Chief Negotiator Barnier stated that he was ready to work on alternative arrangements for the Irish border while Irish Prime Minister Varadkar stated that he could see a route for resolving the Irish border issue. The rhetoric boosted the Pound with the Euro moving back above 1.1111 and Sterling pushed sharply higher against a weaker Dollar to near 1.2550. We expect further volatility today. 


Federal Reserve Vice-Chair Richard Clarida stated the economy was in a good place, but that uncertainties have increased as inflation had been coming in soft. Importantly, he stated that they didn’t want to wait until data decisively turns for the Fed appropriately act to keep the economy going. New York President John Williams also stated that it is better to take a preventative approach rather than wait for disaster, central banks needed to act quickly and forcefully when rates are low and lastly, Fed effectiveness could be undermined if inflation gets stuck below target. 

There was a sharp shift in futures markets following comments by Williams and Clarida with the chances of a 0.50% rate cut at July’s policy meeting seen at over 50%. In response, the Dollar declined sharply to 2-week lows later in the US session. 


The sudden pickup in volatility against the Dollar was unexpected as the Euro reversed an initial dip to 1.12 and surged to an overnight high of 1.1280. The rapid swings suggest the currency could continue to trade in a choppy manner, likely within a range of 1.1220 to 1.1290 region.

After the sharp drop on Tuesday, we indicated on Wednesday that the Euro would be expected to trade with a downside bias but would unlikely accelerate much lower. That said, yesterday’s rapid bounce came as a surprise with strong resistance at 1.1240 easily breaching. 

German PPI has just come in -0.4% with -0.1% having been expected. The miss will only reinforce more dovish expectations from the ECB. As of writing, the Euro is settling around 1.1257.

Data to watch: 

04:30 JPY All Industry Activity Index (MoM) (May)
06:00 EUR Producer Price Index (MoM) (Jun)
08:30 GBP Public Sector Net Borrowing (Jun)
12:30 CAD Retail Sales (MoM) (May)
12:30 CAD Retail Sales ex Autos (MoM) (May)
14:00 USD Michigan Consumer Sentiment Index (Jul)
15:05 USD Fed’s Bullard speech
20:30 USD Fed’s Rosengren speech
20:30 JPY BoJ’s Governor Kuroda speech 

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