Sterling saw some intraday volatility yesterday but ultimately closed well within its recent range against the dollar, while weakening to the euro. The idea of suspending Parliament to force through a no-deal exit remained topical in the Tory leadership race, with former Brexit Secretary Dominic Raab as Boris Johnson both referencing it in Wednesday night’s hustings. The possibility of proroguing Parliament caused an uproar when it was previously floated by Raab, and despite not being attracted to the option Johnson stopped short of ruling it out, highlighting the myriad of political risks that remain in the price for sterling.


The euro closed higher against GBP yesterday, reaching its highest level against the pound since January. Eurozone Inflation has slowed rapidly since October and has caused concerns at the ECB as it has fuelled deteriorating inflation expectations by market participants. Today at 10:00 BST June’s CPI reading for the Eurozone is released after a wedge of country-specific releases prior. Expectations are for headline inflation to level out at 1.2%.


The dollar once again traded flat in a broad sense yesterday, with the main USD indices such as DXY and the Bloomberg Dollar Index once again closing more or less exactly where they opened. This weekend’s G20 meeting certainly has the potential to shake up dollar pricing along with global markets, however. Donald Trump and Xi Jingping are scheduled to have a face-to-face meeting on Saturday, with the perilous state of US-China relations in focus. Risk. Yesterday’s data offered little decisive new information about the US economy, with Gross Domestic Product growth being downgraded slightly to 3.1% for the first quarter, and weekly unemployment claims rising to 227,000. Today’s data is a little more promising: Personal Consumption and Income data will be released at 13:30 BST, accompanied by personal consumption price data. At 14:45 BST, the Chicago Fed’s Purchasing Managers Index will be released and comes after a string of softening survey data in recent weeks including Tuesday’s weak Richmond Manufacturing Index.


The loonie gears up for this week’s top-tier data release which could see its rally extend further should the Bank of Canada business outlook and April’s GDP surprise to the upside and confirm the BoC neutral monetary policy stance. Since mid-June, the loonie is up 2.5% as diverging monetary policy stances with the Fed continues to support the rally. Recently, the 2-year US-Canada yield spread, which is a barometer of monetary policy stances and near-term expectations of policies of the Fed and BoC, hit a 17-month low. If the data surprises to the upside the loonie’s rally may extend into next week should relations deteriorate between the US and China. A souring of relations between the economic superpowers would prompt the Fed to cut rates and meet the expectations of the market, further narrowing yield spreads between the US and Canada.