Sterling as flat as World Cup Beer
Friday’s trading session suffered from a dearth of economic data or political impetus. Futures markets continued to price in a circa 50% chance of a Bank of England interest rate hike at the August policy meeting. Oil prices also rebounded, although the UK currency was unable to hold above 1.3300 against the Dollar while the Euro briefly tested 1.1360.
The Pound was still hampered by political uncertainty instigated by Conservative Party tensions and expectations of criticism at this week’s EU Summit. CFTC data recorded a sharp reversal to a net short position, the largest since September 2017, which should lessen the chances of a sell-off as it’s already priced in. Sterling was little-changed, opening this morning just above 1.3250 against the Dollar without making fresh headway as global trade fears dominated.
The Greenback was trading lower against the G10 currencies for the second successive day at the end of last week. The move was attributed to profit taking as we headed into the weekend amidst growing speculation that trade talks with China will resume in the coming weeks.
The June US PMI manufacturing index declined to a seven-month low of 54.6 from 56.4 previously, with a slowdown in new orders growth, although pressure on manufacturing supply lines intensified and the rate of price increases remained close to seven-year highs. The services-sector index weakened slightly to 56.5 from 56.8 with the sharpest increase in service charges for almost four years. The data illustrated mixed pressures on the economy and Federal Reserve.
Eurozone manufacturing PMIs declined to an 18-month low of 55.0, as expected. The services PMIs produced a stronger-than-expected rebound to a four-month high of 55.0. There was strong inflationary pressure on input prices and the second largest increase in the last ten years for output prices.
The data indicated a more confident Eurozone tone and pricing data should boost European Central Bank (ECB) confidence in reducing stimulus. Conversely, political uncertainty in Italy and Germany limited underlying Euro support during the day.
Data to watch:
06:00 JPY Coincident Index (Apr)
06:00 JPY Leading Economic Index (Apr)
09:00 EUR IFO – Business Climate (Jun)
09:00 EUR IFO – Expectations (Jun)
09:00 EUR IFO – Current Assessment (Jun)
13:30 USD Chicago Fed National Activity Index (May)
15:00 USD New Home Sales (MoM) (May)