Pound taking a pounding
The Pound crashed to a fresh six-month low against the Dollar, falling below the 200-day moving average.
Sterling is down over 8% from April’s high of 1.4376 as economic data for the UK has turned sour and continues to slump, driving the Bank of England (BoE) off of a hawkish perch that saw the central bank back down from a highly-anticipated interest rate hike in early May. Current market expectations see a rate hike pushed to September of this year, but macro indicators have yet to return to higher numbers as the ‘first-quarter slowdown’ that was initially blamed on bad weather continues to seep further into the mid-year.
The British Retail Consortium will release its latest index readings later today. The rest of the week shows little of importance on the data docket for Sterling, bringing little that could entice bulls to return to the tables, especially as the political instability within Italy emanates outward, cooling off risk appetite in global markets.
The US Dollar is trading near fresh highs as investors continue to fuss over the political drama unfolding in Italy and Spain. Yields of the key US 10-year has plummeted to the 2.75% region, where it seems to have found some support which adds impetus to the Buck.
Trade tensions with China are resurfacing ahead of next week’s trade talks (the 3rd round) as overnight, the White House said a final list of tariffs on $50bn of Chinese imports will be released by 15 June and the tariffs will be imposed ‘shortly thereafter’.
In the US data space later this week, another revision of Q1 GDP figures is due next along with the ADP employment report for the month of May, all preceding Friday’s key Nonfarm Payrolls figures. The Conference Board will be releasing its index later today; the only piece of data coming to the market.
The Euro is trading up 0.3% at around 1.1570 against the US Dollar as the German retail sales positively surprised the market, rising 1.2% month-on-month while increasing 2.3% year-on-year in April in real terms. This comes ahead of German inflation and unemployment data due later today.
That being said, political drama unfolding out of Italy sent the Euro crashing to its lowest level since July of 2017 yesterday at 1.1509. The country is facing the prospect of a fresh election whilst risk aversion eased following comments from the 5 Star Movement leader, Di Maio, saying that he never aimed to leave the Union. Italian 2-year yields surged to the highest level since December 2012. Investors are clearly in near-panic mode amidst concerns that Italy could be pushing its way out of the currency union.
Data to watch:
01:00 JPY Bank of Japan Governor Kuroda Speech
02:10 NZD RBNZ Governor Orr Speech
13:00 EUR Harmonized Index of Consumer Prices (YoY) (May)
13:30 USD Gross Domestic Product Annualized (Q1)
13:30 USD Core Personal Consumption Expenditures (QoQ) (Q1)
15:00 CAD BoC Rate Statement
15:00 CAD BoC Interest Rate Decision