Morning Report: 30 June 2017

30th June 2017 By: Ranko Berich

GBP Sterling saw further consistent gains versus USD yesterday while trading flat against the euro, showing price action typical for the week as a whole. Money and Credit data from the Bank of England showed the extent to which consumer spending was expanding in the UK, as warned about by the Bank’s Financial Policy Committee earlier in the week. Unsecured consumer credit was up 10.3% year on year, vastly outstripping wage growth over the same period. M4 Money Supply contracted 0.1% however, compared to previous monthly growth of 1.3%. Today at 09:30 BST revised Gross Domestic Product growth data will be released, as will the updated Current Account and indices for business investment and services.

EUR Like sterling the euro also smashed its way to new highs against USD yesterday, driven by a moderately firm print for German Inflation. Prices were up 1.6% year on year, based on preliminary data, a slightly better than expected reading that was nonetheless below the ECB’s 2% target. Spanish inflation was up 1.5% year on year, although this was slightly shy of expectations. German Retail Sales smashed expectations today at 0.5% vs 0.3% , and the French Consumer Spending jumped in May to 1.0% vs 0.5% expected, the highest monthly increase since March 2016. At 10:00 BST eurozone Consumer Price Index inflation will be released.

USD The dollar sell off continued yesterday, and overnight, with the greenback down against the majority of the G10. Yesterday’s data included little justification for the move, which appears to be driven by changing market sentiment towards monetary policy elsewhere in the G10. In fact, yesterday saw a strong upwards revision of Gross Domestic Product growth in the 1st quarter, up to 1.4% from 1.2% previously. Today is a red letter day for USD – monthly Personal Consumption Expenditures Price Index data will be released at 13:30 BST, and with USD under heavy pressure already a weak print could see the greenback selloff turn into a rout.

CAD The loonie’s progress against USD slowed compared to earlier in the week yesterday and overnight, but USDCAD has nonetheless consistently made new lows over the last 24 hours. The move has been driven by central bank hawkishness, as well as US dollar weakness in general. Today at 13:30 BST, monthly Gross Domestic Product figures will be released alongside price indices for Raw Materials and Industrial Products, followed by the Bank of Canada’s Business Outlook Survey at 15:00.

UK news

  • FT. May wins Queen’s Speech vote with slender majority Corbyn suffers rebellion by Labour MPs on Brexit amendment. Prime minister Theresa May on Thursday won a crucial vote of confidence in the Commons by 323 to 309, after MPs endorsed the Queen’s Speech and effectively approved her creation of a fragile government to deliver Brexit. After a week of backroom deals and abandoned Tory manifesto promises, Mrs May finally emerged from the chaos of this month’s inconclusive general election with a slender Commons majority of 14. Meanwhile, Labour leader Jeremy Corbyn sacked four pro-European rebels on his frontbench after a total of 49 of the party’s MPs defied his instructions and backed an amendment to the Queen’s Speech calling for the UK to stay in the EU single market after Brexit.
  • FT. Global bond and stocks sell-off enters second day Pace of selling cools but concern at demise of ultra-loose monetary policy sets tone. A sell-off on global stock and bond markets entered its second straight session as investors scrambled to adjust to increased expectations of tightening of ultra-loose monetary policy. Recent remarks by the heads of the European Central Bank, the Federal Reserve, the Bank of England and the Bank of Canada have raised expectations that the period of historically low interest rates and unprecedented central bank bond buying will soon recede. That has triggered a rush by some investors to reduce their exposure to government debt, pushing yields higher.