As expected Boris Johnson was announced as the winner of the Conservative Party leadership contest. The landslide victory of 66% gives the new Prime Minister a strong mandate within the conservative party – although with a House of Commons majority that is in the low single digits, it would take less than a handful of rebels to derail any legislation. Britain’s new Prime Minister will give his first proper speech today at 5 pm BST. Given yesterday’s victory comments had nothing in the way of policy, Boris may give some sterling relevant hints about his Brexit plan this afternoon. The first order of business is likely to be attempting some kind of renegotiation of the Withdrawal Agreement – depending on how ambitious Boris’s demands are and how the EU responds this could end up being either positive or negative for sterling. The other key factor for sterling today is how much of a mention the prospect of No Deal Brexit will get, as well as how firm Boris’s previous commitments to leaving on October 31st with or without a deal. High Street lending figures from UK Finance will be released at 09:30 BST.
As most of Europe braces itself for a historic heatwave, sentiments around the single currency cool further as the single currency hit a two-month low against USD in the anticipation of a dovish European Central Bank on Thursday. A glimmer of hope was then brought by the July Eurozone consumer confidence, which stabilised at a level of -6.6. This is above the long-term average and points roughly to a 2% year on year growth in retail sales. The latter is then a support for economic growth in coming months and provides a bit of a counterbalance for the worsening conditions in the manufacturing sector, especially the parts that are export-focused. Today sees the culmination of national Flash Purchasing Manager Index data at 9:00, which is the last major data release before the ECB meeting on Thursday.
The greenback had yet another strong day across the board as it made advances against all G10 currencies and the DXY dollar index reached a two month high. This dollar strength may be reflective of the relative economic strength in the US compared to the rest of the world which was highlighted in the International Monetary Fund’s latest global outlook. The fund downgraded 2019 global growth expectations from 3.3% in April to 3.2% now. Conversely, the 2019 US growth projection has been rewarded an upgrade from 2.3% to 2.6%. Meanwhile on the trade front, it was confirmed that US Trade Representative Robert Lighthizer and accompanying senior US officials will make their way to China next Monday for the first official, high-level trade talk after the negotiations broke down in May. This afternoon we have the Flash Markit Manufacturing and Services PMI at 15:45 BST while the suspense for Friday’s first Q2 Gross Domestic Product reading is building.
The loonie seemed to advance in the slipstream of USD yesterday as it strengthened against the entire G10 basket, except for the greenback. The loonie likely profited from an improved trade sentiment after it was confirmed that high-level trade talks between the US and China will continue again coming Monday. CAD benefited as it is an open economy, while the surge in WTI oil prices late in the session undoubtedly buoyed the currency as well.