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Teflon Theresa dodges backbench rebellion

Teflon Theresa dodges backbench rebellion

UK CBI industrial orders bounced back more sharply than expected, printing 13 for June, up from -3 the previous month. Strong output increases for the second consecutive quarter suggest a solid industrial outlook should add support to the Pound.

Teflon Theresa avoided defeat again in the latest House of Commons vote on the EU Withdrawal Bill following more concessions. The legislation has now cleared parliament and Sterling briefly pushed above 1.3200 against the Dollar and the Euro consolidated around 1.1376.

Investors were cautious ahead of this afternoon’s Bank of England policy statement and Governor Mark Carney’s Mansion House speech. Overall consensus shows very little expectation of an interest rate change, combined with a lack of fundamental confidence, the Pound is currently out of favour.


The Euro held its ground partly yesterday after comments from European Central Bank (ECB) President Mario Draghi said that they expect inflation to move up towards its 2% target due to an expected increase in wages.

In comments yesterday, ECB Council member Nowotny stated that he sees the Euro depreciating against the Dollar. It is unusual for central bankers to make direct comments on currency levels and hence, late in the day, the Euro dipped lower with a further test of support below 1.1550 against the Dollar. This comes amid an assumption that the bank wants a weaker Euro to help push inflation higher.

There were also reports from the ECB which suggested that the bank is increasingly concerned over the risks of a trade war. President Draghi stated that he was confident that inflation was converging to target with unit labour costs on an upward path as the factors which held back wages growth were gradually fading; rhetoric is becoming slightly more positive.


Fed Governor Jerome Powell reiterated that the case for gradual interest rate increases is strong and that the economy is performing very well while fiscal policy is expected to boost demand over the next few years. There were some cautious comments as he suggested moderate wages growth was an indication that the jobs market may not be excessively tight, and that the impact of unemployment below the natural rate might not be large. The commitment to rate hikes from the Fed head underpinned the Dollar, especially given the dovish stance of other major central banks.

US existing home sales declined 0.4% for May compared with expectations of a 1.5% increase.

Data to watch:

24h USD OPEC meeting
24h EUR Eurogroup meeting
05:30 CHF SNB Financial Stability Report
08:30 CHF SNB monetary policy assessment
08:30 CHF SNB Interest Rate Decision
09:30 GBP Public Sector Net Borrowing (May)
09:30 CHF SNB press conference
10:45 EUR German Buba President Weidmann speech
12:00 GBP BoE Asset Purchase Facility
12:00 GBP BoE Interest Rate Decision
12:00 GBP Monetary Policy Summary
12:00 GBP BOE MPC Vote Cut
12:00 GBP BOE MPC Vote Unchanged
12:00 GBP BOE MPC Vote Hike
12:00 GBP Bank of England Minutes
13:30 USD Continuing Jobless Claims (Jun 8)
13:30 USD Initial Jobless Claims (Jun 15)
13:30 USD Philadelphia Fed Manufacturing Survey (Jun)
14:00 USD Housing Price Index (MoM) (Apr)
21:15 GBP BOE’s Governor Carney speech

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