Trade deal by 2021?
Underlying Sterling sentiment remained fragile following last Friday’s downbeat press conference from EU Chief Negotiator Barnier. There was fresh speculation that there would be no trade deal in place before the end of 2021 which would cause major dislocation to UK trade patterns and undermine the economy.
The UK currency also struggled to gain any significant support from the firm tone in global risk appetite as markets await comments from Bank of England officials this week with speculation that there would be a move towards further monetary easing during the Autumn.
Sterling dipped slightly against the Euro to just above the 1.1060 before pushing up during the US session. The firm tone in equity markets is providing an element of Sterling support and currently it finds itself at 1.3090 against the Dollar and 1.1080 against the Euro.
The Chicago Fed National Activity index declined to 1.18 for July from 5.33 in June with the 3-month moving average strengthening to 3.59 from -2.78 as very weak April data came out of the calculation. There was a positive contribution from production and employment, although there was a negative contribution from sales and inventories as markets continued to debate the US outlook with further uncertainty over the coronavirus outlook on both sides of the Atlantic.
The market focus was on Federal Reserve Chair Powell’s speech on Thursday with traders anxious for hints on next moves by the central bank and potential guidance for the September policy meeting. Overall, markets were slightly less confident of further near-term monetary easing.
The Euro edged slightly higher against the Dollar prior to Monday’s US open, although ranges were narrow amid a lack of data releases and low trading volumes. Underlying Euro sentiment is still hampered somewhat by the weaker than expected business confidence data on Friday with the single currency unable to move back above the 1.1850.
There were also further concerns over Euro-zone coronavirus developments with Germany recording a further increase in new infections.
The German IFO index is due for release today and a stronger than expected reading would help restore further confidence. As of writing the Euro is currently trading just above the 1.18 with the German second-quarter GDP data coming out and being revised to -9.7% from -10.1%.
Data to watch
15:00 – USD – CB Consumer Confidence