Newsletter – 29th June 2017

Morning Bulletin

Yesterday

  • Once again yesterday’s trading was dominated by Central Bankers.
  • The first significant move was a sell off in sterling following comments from BOE Deputy Gov Cunliffe who ultimately took take the same view as his boss Mark Carney. Mr Cunliffe suggested that now was not the time to be considering rate increases, and that the BOE needed to monitor if improvements in business investment and Exports could potentially compensate for the consumer slowdown before any rate hike could be contemplated.
  • Closer to midday there was a second significant move, this time an aggressive weakening of the Euro as ECB sources suggested markets had over interpreted President Draghi’s comments yesterday. According to those ECB sources Mr Draghi had intended to signal a tolerance period for weaker inflation, and not that a move to tighten policy was imminent.
  • Finally, and in stark contrast to his stance just last week, BOE Governor Mark Carney, speaking on a panel yesterday afternoon suggested that the BOE may need to start raising interest rates soon if business investment continues to grow. Mr Carney, like his colleague Cunliffe, cited the trade off between investment and a consumer slowdown as the barrier to removing monetary stimulus.
  • So what was the net effect of all this central banker talk? Well whilst Euro lost a great deal of Tuesday’s gains against a number of it’s major currency counterparts, it was the Pound which was the star performer making massive ground following Carney’s comments:
    • GBP/EUR traded from 1.1275 to as high as 1.1400 before closing around 1.1360
    • GBP/USD traded from 1.2829 to as high as 1.2971 before closing around 1.2922
  • Data of note released yesterday:
    • Eurozone M3 Money Supply y/y 5.0% as expected.
    • Italian Prelim CPI m/m -0.1% (+0.1% Exp)
    • US Pending Home Sales m/m -0.8% (+0.9% Exp)
Overnight
  • Japan Retail Sales y/y 2.0% (2.6% Exp).
  • New Zealand ANZ Business Confidence 24.8 (14.9 Previously) – Highest reading since Sep 2016.
  • In the US, 34 of the largest banks passed 2nd stage of annual stress test.
  • German Finance Minister Schaeuble said that he hopes the EU develops so well in the future that the UK will realise they made a mistake with Brexit.
  • Spanish Flash CPI y/y 1.5% (1.6% Exp).
Today
  • Key this morning will be UK lending figures due at 9.30am, with worries of a consumer slowdown an increase in consumer credit would ease those fears. Expected figure of 4.0Bn.
  • US GDP q/q and Unemployment Claims data take centre stage at 1.30pm this afternoon.
  • Worth noting today is an Italian Bank Holiday.

 

Currency Pair Interbank Rate % Change on Day
GBP/EUR 1.1362 -0.01
GBP/USD 1.2978 +0.43
EUR/USD 1.1421 +0.40
AUD/USD 0.7668 +0.40

 

Time (GMT) Region Data Release Forecast Previous
TBC EUR German Prelim CPI m/m 0.0% -0.2%
09.30 GBP Net Lending to Individuals m/m 4.0Bn 4.3Bn
09.30 GBP M4 Money Supply m/m 1.3% 1.2%
09.30 GBP Mortgage Approvals 64K 65K
13.30 USD Final GDP q/q 1.2% 1.2%
13.30 USD Unemployment Claims 241K 241K
18.00 USD Fed Member Bullard Speaks