We have a blueprint!
Dollar strength kept Sterling on the defensive yesterday but the Pound edged up against a fragile Euro. The government White Paper on post-Brexit trading relationships was published and Parliament was temporarily suspended to regain order. The UK will aim to maintain a common rulebook for goods, including agricultural products with continued harmonisation avoiding friction at the Northern Ireland border. Parliament would have the ability to set trade policy while there would be different arrangements for services.
The Pound gained some support from hopes of a ‘soft’ Brexit, although domestic opposition remained high. Overall, Sterling consolidated just above 1.3200 against the Dollar with the Euro supported at 1.1340.
President Trump opined that a US free trade deal with the UK might be impossible under the latest government’s Brexit proposals which had an impact in undermining Sterling support as it traded below 1.3200 on Friday amid political stresses.
Ahead of the US open Cleveland Fed President Mester stated that the US economy could certainly handle two more interest rate hikes this year. US initial jobless claims declined to 214,000 from 232,000 previously which continued to indicate a robust labour market.
Consumer prices increased 0.1% for June, slightly below forecast, although the year-on-year inflation rate nudged up to 2.9, a 6-year high. The core data was in line with consensus forecasts with a 0.2% monthly increase and the annual rate increased to 2.3%. The Dollar corrected slightly as data failed to beat expectations, but buying support returned amid expectations that gradual inflation gains will lead to further rate increases.
Philadelphia Fed President, Harker, stated that he was open to four rate hikes this year if inflation accelerates. Minneapolis head Kashkari stated that there were notable labour shortages. Fed Chair Powell remained optimistic surrounding the economy, although there were no specific references to monetary policy. The Dollar maintained a firm overall tone with the Euro near 1.1650 on Friday.
ECB minutes stated that progress towards a sustained adjustment of the inflation path had been substantial and policymakers were confident that the progress would continue. There were also comments emphasising that the open-ended forward guidance on interest rates should be emphasised. The single currency failed to gain support amid a dovish tone.
In the data space, nothing worth mentioning in Euroland today, although Export/Import Prices are due.
Data to watch:
00:00 USD FOMC Member Kashkari Speech
24h EUR EcoFin Meeting
11:00 GBP MPC Member Cunliffe Speech
14:00 USD Michigan Consumer Sentiment Index (Jul)
15:00 USD Fed Monetary Policy Report
16:30 USD FOMC Member Bostic speech
17:00 USD Baker Hughes US Oil Rig Count