News & Analysis


Similar to the euro, sterling’s performance today can largely be viewed as traders fading yesterday’s month-end rally. With top-tier data light out of the UK today, some attention may be given to incoming Brexit headlines and the ongoing drama taking place within the Conservative hierarchy. Additionally, developments in both the broad euro and dollar will likely prove pivotal at the start of Q3.


The single currency continued to trade under the pump yesterday morning as global and European growth fears continued to be the narrative driving market price action. It wasn’t until the dollar broadly sold off that speculation over a return to June’s lows eased. This morning, normal service has resumed in markets. The single currency is trading a fifth of a percentage point lower against the dollar as traders look to fade yesterday’s rally. This morning, eurozone inflation data due out at 10:00 BST will draw a lot of market focus, especially after Lagarde stated that the ECB will paying close attention to the euro-area aggregate when questioned about Germany and Spain’s readings on Tuesday. The composite CPI reading is expected to break a new record at 8.5%, but if Italy’s preliminary reading, also due out at 10:00 BST, follows in the shoes of the Spanish data, risks are posed to the upside.


As expected, it was all about month-end flows in yesterday’s session. While Treasury yields and equities slipped, befitting with continued growth concerns, the dollar sold off against the whole of the G10. The 0.35% slip in yesterday’s session meant that the DXY’s returns on the quarter fell just shy of 7%. Today, flows are likely to dominate the session again as traders position ahead of the 4th of July weekend in the US. On trend with the last 6-months, which marked the worst first half of the year for US equities in 50 years, equity futures point lower this morning and Treasury yields continue to plummet ahead of the US open. Unlike yesterday, however, the dollar is trading higher this morning on these dynamics as it resumes its role as a global safe haven. Losses are the largest among the antipodean currencies this morning, with AUD and NZD hitting the lowest level against the dollar in two years as they drop around a percentage point in early trading. The data calendar for the dollar also repopulates, with June’s ISM manufacturing data scheduled for 15:00 BST.  The main index is expected to continue falling close to the breakeven 50.0 threshold, but with manufacturing output slowing globally, focus will instead be paid to the prices paid, new orders, and employment indices.


Despite the downturn in equities and commodities yesterday, the loonie was propped up by broad USD selling heading into month-end. This morning, however, the Canadian dollar notches losses in excess of 0.4% against the dollar as the greenback posts a strong retracement and commodities continue to drop on deteriorating demand outlooks. Today, the data calendar is empty in Canada as domestic markets are closed for Canada day.



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