Newsletter – 21st July 2017

Morning Bulletin

Yesterday

  • The ECB kept rates unchanged yesterday but as is often the case, the market moved over comments made in the accompanying press conference.
  • ECB President Mario Draghi caused the euro to surge against the pound and US dollar after discussing inflation expectations and the potential completion of the Bank’s asset-purchasing program.
  • Draghi confirmed that the central bank has acknowledged signs of improvement in euro zone growth and referred to plans for policymakers to bring a discussion on changes to its QE program to the table after the summer recess.
  • These comments caused broad euro strength which saw GBP/EUR hit 8-month lows. GBP/EUR opened at 1.1302 and dropped down to hit the low of the day at 1.1137 before it closed at 1.1153.
  • This represented a 1.32% gain in the value of the euro against the pound – the largest gain in percentage terms since January.
  • Unsurprisingly given Draghi’s comments, EUR/USD continued its recent upwards momentum and reached its highest levels since August 2015 with a high of 1.1658. The market closed at 1.1629 after an open of 1.1514 representing a 1% increase on the day.
  • We saw stronger than expected retail sales data from the UK yesterday with a figure of 0.6% beating the economist’s estimate of 0.4%. Despite this we saw GBP/USD soften as Brexit talks remain at the forefront of investors minds.
  • GBP/USD fell by 0.37% over the course of the day closing at 1.2973 although it did trade as low as 1.2932 on the day.
  • We had mixed data released from the US yesterday as unemployment claims beat expectations coming in at 233K vs 245K but Philly Fed Manufacturing Index came in weaker than expected at 19.5 vs 23.4.
Overnight
  • Very little data to report from the overnight session.
  • GBP/AUD seems to have halted its recent downward momentum for this morning at least, with the market currently trading 1.6427, pushing up from yesterday close of 1.6294.
  • Yesterday’s euro strength saw EUR/AUD rally from 1.4482 to 1.4620 and momentum has carried overnight – the current interbank rate is 1.4730.
Today
  • This morning we have public sector net borrowing from the UK at 9.30am with a figure of 4.3B estimated.
  • Following that the only data of note is from Canada. We expect Canadian CPI m/m and core retail sales m/m at 1.30pm with forecasted figures -0.1% and 0.0%, respectively.
Currency Pair Interbank Rate % Change on Day
GBP/EUR 1.1162 +0.08
GBP/USD 1.2994 +0.16
EUR/USD 1.1641 +0.10
AUD/USD 0.7904 -0.63

 

Time (GMT) Region Data Release Forecast Previous
09:30 GBP Public Sector New Borrowing 4.3B 6.0B
13:30 CAD CPI m/m -0.1% 0.1%
13:30 CAD Core Retail Sales m/m 0.0% 1.5%
13:30 CAD Common CPI y/y 1.3%
13:30 CAD Retail Sales m/m 0.3% 0.8%
13:30 CAD Trimmed CPI y/y 1.2%