Morning Report: 28 July 2017

28th July 2017 By: Ranko Berich

GBP Sterling began to pare back its gains versus the US dollar yesterday, although this morning’s trading levels remain above Thursday’s open. Price action against the euro has basically been flat this week, suggesting that for now sterling may have finally found some support against the single currency. The Confederation of British Industry’s Realised Sales index, a survey measure of reported sales volumes, rose to its highest level since the April retail sales boost, suggesting that UK consumers may be shrugging off falling real incomes. However, overnight the GfK Consumer Confidence Index fell to its lowest level since the EU referendum, painting a conflicting picture of the health of the economy.

EUR After a short lasted break yesterday which saw the euro give back some of the recent gains against the dollar, the single currency is again assaulting recent multi-year highs after today’s data in the eurozone showed very positive growth figures in Spain and France. France is enjoying the longest growth streak since 2011, and Spain grew at the fastest pace since 2015, becoming the best performing economy among the four biggest economies of the single currency area.

USD The composite dollar index DXY reached a fresh low yesterday morning, but has pared back its losses slightly since then as USD has posted minor rallies against GBP and EUR. The US Government and Legislature remained a source of turmoil and comedy, as the Senate once again failed to pass repeal legislation of Obama’s signature healthcare reform. Elsewhere, newly appointed White House Communications Director Anthony Scaramucci went on an expletive ridden rant about other senior administration figures. Although USD saw little reaction overnight, the lack of political cohesion – or even basic legislative function, may well be contributing to prevailing bearishness on USD. Yesterday’s Durable Goods Orders data was fairly strong, with headline Orders rising a whopping 6.5% in June. Today at 13:30 BST preliminary US Gross Domestic Product growth data will be released, with the median forecast on Bloomberg being for an annualised growth rate of 2.7%.

CAD The loonie weakened throughout the day yesterday as the dollar recovered some lost ground at the same time USDCAD hit a very strong support level this week. It appears that demand of CAD could falter around these levels which could prompt a retracement in USDCAD if political tension in the US does not skyrocket.

UK news

  • FT: Senate rejects last-gasp Obamacare repeal bill Trump legislative agenda dealt big blow after McCain-led rebellion on ‘skinny’ repeal. The seven-year Republican quest to scrap Obamacare was left all but dead early on Friday morning after party leaders lost a Senate vote showing they were unable to use their control of Washington to overhaul the US healthcare system. In the biggest legislative blow to President Donald Trump to date, Republican John McCain of Arizona, who returned to Washington this week having been diagnosed with brain cancer, cast the decisive vote to kill off his party’s last-gasp effort at healthcare reform. The failure after a night of political drama leaves Mr Trump unable to deliver on his signature electoral pledge to repeal Barack Obama’s Affordable Care Act and with no clear path to a significant legislative win in his volatile six-month-old presidency.
  • Reuters: UK consumer morale slips as economic mood hits four-year low – GfK British consumer morale has sunk back to depths hit just after last year’s Brexit vote and worse may be to come as households’ view of the broader economic situation dropped to a four-year low, according to a survey on Friday. Market research firm GfK’s consumer confidence index fell to -12 in July from -10 in June, a one-year low and slightly below the median forecast in a Reuters poll of economists. The figures are likely to strengthen the conviction of Bank of England officials who want to keep interest rates on hold ahead of next Thursday’s policy decision. “All bets must now be on a further drift downwards in confidence,” said Joe Staton, head of market dynamics at GfK.