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Trump’s olive branch buoys the Dollar

Trump’s olive branch buoys the Dollar

UK bond yields edged lower throughout yesterday and Sterling failed to make headway.  Foreign Secretary Jeremy Hunt reiterated his warning that the dangers of a no-deal Brexit were increasing by the day. Irish Prime Minister Varadkar was more hopeful, expectant that  a deal would be made and that there was scope for some flexibility to facilitate it.


Sterling suffered from month-end position adjustment and the Euro peaked near 1.1190, while the Dollar pushed the Pound below 1.3100. A late and limited Sterling recovery against the Euro appeared near the close, although fragility remained following wider losses in European currencies against the Dollar.


This morning’s Markit Manufacturing PMI, much worse than expected, could set the Pound back towards the 1.3000 mark as caution remains ahead of the Bank of England policy decision tomorrow. Futures markets are pricing in a 90% chance of a rate hike. The Pound opens near 1.3100 this morning against the Dollar  and 1.1220 versus the Euro.




In what was a busy day for news in the Eurozone, German retail sales increased by 1.2%. GDP growth came in slightly lower than consensus at 0.3% but headline inflation increased to 2.1% and the core rate increased to 1.1%. Initially the EUR dipped on the early news but then rallied when the positive inflation data came out. Bond yields, however, continued to be put under upward pressure.


General consensus is that before the BoE’s meeting on Thursday, the market is already pricing in an interest rate rise and that any perceived recovery is more corrective, as opposed to growth meaning that volatility should be kept to a minimum today. Overnight, the dollar strengthened due to strong data with the EUR/USD closing at 1.1691.


Most EU data today is focused around manufacturing figures, so not too much volatility is expected in the session, and news remains quiet for the rest of the week. Attention will be focused on tomorrow’s BoE meeting and on Friday it will be on the US nonfarm payrolls.




The US Dollar traded lower for the second day in a row. The market has been sifting through incoming data out of North America as US personal consumption expenditure missed estimates, coming in at 1.9%.


President Trump extended an olive branch to Iran, in attempts to diffuse geopolitical risks whilst the greenback gathered a little extra pace after the White House announced it could increase tariffs on US imports from China from 10% to 25% in the next round worth of $200 billion.


The 1st August brings with it the second of three central bank meetings for the week, with the Federal Open Market Committee (FOMC) meeting tonight. No change in policy is expected, whilst no press conference – nor a fresh summary of economic projections – are on the agenda, so the only focus really will be on cosmetic changes to the statement. The ISM manufacturing will be the salient event preceding the FOMC meeting.


Data to watch:


n/a        GER 10-y Bond Auction

02:45    CNY Caixin Manufacturing PMI (Jul)

08:00    EUR Non-monetary policy’s ECB meeting

08:55    GER Markit Manufacturing PMI (Jul)

09:00    EUR Markit Manufacturing PMI (Jul)

09:30    GBP Markit Manufacturing PMI (Jul)

13:15    USD ADP Employment Change (Jul)

15:00    USD ISM Manufacturing PMI (Jul)

15:00    USD ISM Prices Paid (Jul)

19:00    USD Fed’s Monetary Policy Statement

19:00    USD Fed Interest Rate Decision



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