Attention turns to the central banks, but politics won’t go quietly

11 July 2018

FC Exchange


GBP – May leaves it until late in the day 

Last week

-  Sterling was buoyed late on Friday as Theresa May finally managed to get her government to agree to a Brexit plan.
-  Services PMI came in at an 8-month high of 55.1 in June, beating forecasts of 54.0 and thus increasing expectation of a rate rise in August.
-  Markets are now pricing in a 53% chance of a rate rise at the BoE’s next meeting in August and an 88% chance of a quarter percent rise by the end of 2018.  

Week ahead

With the resignation events overnight threatening to overshadow the positive progress made on Friday, traders will now look to Tuesday’s key economic data and BoE’s governor Carney’s speech on Wednesday, for any signs as to whether an interest rate rise could be on the cards at the BoE’s next meeting in August.

Europe | EUR

EUR – ECB’s Draghi to speak

Last week

-  The immigration and refugee theme was still a focal point for traders last week, given there was no significant economic data for them to get their teeth into.
-  Of the data that was released, it was a mixed bag for the Eurozone, with better than expected services PMI figures from Germany and Italy, outweighed by worse than expected figures from both Spain and France.
-  The euro also suffered some underlying anxiety due to the evolving trade war situation.   

Week ahead

ECB President Mario Draghi will be delivering two speeches this week and these will be the main focus for traders, as they look for any clues as to what his next move may be with regards to monetary policy for the Eurozone.  

With little else of interest due data wise for the euro, attention will also remain on any developments in the United States multi-front trade war.


USD - Non-farm payroll figures robust but trade war remains the hot topic

Last week

-  The US-China trade continued to weigh on USD last week.
-  The key non-farm employment change figures on Friday were much better than forecast, lending support to expectations of strong U.S economic growth despite the threat of the trade war.
-  The dollar failed to gain much from this improved non-farm employment figure, as it was offset by a slight increase in the headline unemployment rate and a drop in the month-on-month average hourly earnings figures.


Week ahead

Despite some strong signs of a growing U.S economy, the fact that the U.S is at the centre of what is in essence, a huge disruption to the global trading system, it’s likely that any gains for USD in the short-term will be fairly muted. Outside of the trade war saga, the week ahead is fairly light on data releases, with Wednesday’s crude oil inventories and Thursday’s inflation figures being the focal point for traders.



AUD –  No change to the headline rate by the RBA

-  RBA decided to leave its interest rate unchanged at 1.5%, likely prompted by weak wage growth and lacklustre consumer spending.
-  Tuesday sees the release of the National Australia Bank Business Confidence figure, with traders hoping that the number will be an improvement on last month’s fairly poor figure.
-  With no real further significant data due for release, AUD will likely remain susceptible to risk factors and changes in commodity prices as a result of the ongoing U.S multi-front trade war.

CAD - Bank of Canada rate announcement to set the tone

-  CAD had a fairly quiet week last week, saving all of its economic data releases for Friday and delivering a rather mixed bag; posting a better-than-expected employment figure, but an increase in the trade balance deficit and unemployment rate
-  Wednesday is the day when it all happens, with the BoC delivering their interest rate decision, accompanied by the monetary policy report and followed up with a press conference shortly afterwards.
-  Traders will also be keeping an eye on the crude oil inventories release on Wednesday, as although it’s a U.S indicator, it affects CAD due to Canada’s sizable energy sector.

NZD - Another quiet week ahead but manufacturers remain in the spotlight

-  Last week saw an increase in the number of businesses expecting a deterioration in economic conditions, up to 19% from 10% of businesses last quarter.
-  The Global Dairy Trade price index dropped 5% from its previous figure and at its fastest pace so far this year.
-  It’s another quiet week data wise for NZD, with the main release of interest being the Business NZ Manufacturing Index. This survey reflects the sentiments of manufacturers towards general business conditions.  



This week's economic events:

EUR – ECB President Draghi speaks – Monday

GBP – GDP month on month data - Tuesday

GBP – Manufacturing production month on month data - Tuesday

GBP – BoE Governor Carney speaks – Wednesday

CAD – BoC rate statement - Wednesday

USD – Inflation data – Thursday


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