Morning Report: 16 July 2018

16th July 2018

GBP.  After a week in which Theresa May seemingly scrambled for friends, both she and sterling were lent a helping hand on Friday by President Trump who called earlier comments about the unlikeliness of a UK-US trade deal under the current Brexit trajectory “fake news”. Trump said earlier that Boris Johnson would make a great Prime Minister – adding to previous market concerns over a vote of no confidence but now tried to ease these concerns somewhat by stating that May was a strong negotiator and that he’d prefer her as an ally to a foe. Over the weekend, May’s woes continued with David Davis and Boris Johnson, two senior conservative party members and ex-cabinet ministers, slating May’s policies in editorials. Adding to this, Justine Greening, another Tory MP and former education secretary, called for a fresh referendum. Looking forward, this week holds three top-tier data releases for sterling, all released at 09:30 BST. On Tuesday, Average Earnings are released for May alongside measures of unemployment, whilst the Consumer Price Index measure of inflation for June is released on Wednesday and data on Retail Sales for June is released on Thursday.

EUR.  Euro experienced a “comeback Friday” on which it did not only rally in the US session after slumping earlier against the dollar, but also managed to pare some of the losses it made earlier during the week. President Donald Trump called the European Union a “foe” over the weekend, which is extra salient as the EU Trade balance comes out this morning at 10:00 BST. So far euro has reacted rather stoically to these comments, however, and is even trading slightly up on the EURUSD cross. This week the 20th EU-China summit will be held in Bejing, in which the blocs may discuss how to form a common front against the US in a trade war. A firm front may not form, however, without any concessions from the side of the Chinese, as the EU very much shares the concerns over intellectual property rights in China. Final Eurozone CPI will be published on Wednesday, with the Current Account being announced on Friday.

USD. The greenback seemed desensitised by Trump antagonizing his NATO allies at the end of last week. The dollar made gains against the whole of the G10 currency board when measured on a weekly basis, with the most gains coming against SEK and JPY, whilst the Aussie dollar performed the best, only losing out 0.08%. Today, Donald Trump continues last week’s trend of visiting foreign counterparts as he is in Helsinki to meet with Vladamir Putin. Hopes are slim for the two parties to revive bilateral relations, with key areas such as Syria, conflict in Ukraine and nuclear disarmament at the top of the agenda. Trump may be looking for new friends, after tearing down the international framework for multilateral cooperation piece by piece over the previous months, but whether Putin and Russia are the right choices for him given recent domestic politics remains to be seen. This afternoon at 13:30 BST, Retail Sales for June are released and Federal Reserve Chairman, Jerome Powell, testifies in front of the Senate Banking Committee on the semi-annual Monetary Policy Report on Tuesday, and for the House of Representatives on Wednesday.

CAD. The loonie was heading for bigger losses on Friday until a rally in oil prices put a floor under this and the lost terrain eventually ended up being quite marginal from a CAD perspective. All in all, it seems that the hawkish-leaning Bank of Canada that met on Wednesday for a presser lend some vigour to the second half of the week for CAD. This week is well-filled with data, with Foreign Security Purchases today, Manufacturing Sales on Tuesday and CPI and Retail Sales on Friday. Also, the OPEC meets on Friday and as this can put oil prices on the move, CAD stands ready to follow some of these waves of volatility flowing through the oil markets.