Sterling pared back last week’s gains significantly yesterday, and is once again threatening to reach fresh lows against the US dollar ahead of this morning’s highly significant labour market data. All indications seem to be that the UK Economy either contracted or grew 0.0% in the second quarter, dragged down by Brexit, weakening business investment and slowing global growth. The prospects for a modest pickup in the second half of the year are good based on the current labour market and savings trends; real incomes are rising and the likely increase in consumer spending should support a return to growth. This sunny picture falls apart, however, if the labour market begins to show signs of weakness, so the stakes for today’s labour market figures at 09:30 BST are high indeed.


Maybe the euro was mesmerized by the potential confirmation for Ursula on der Leyen as the new European Commission President, or potentially the single currency was preoccupied with a potential new election in Spain. Whatever the reason, EUR crosses didn’t move much despite ample political shifts like the chances of von der Leyen to become the new EC head that drastically improving after Socialist Party members pledged their support. Today sees the German ZEW Economic Sentiment at 10:00 BST, together with the Eurozone’s freshest Trade Balance data.


The greenback traded slightly higher yesterday in a broad sense, closing higher against sterling and the euro but weaker against AUD and NZD, which were boosted by some good Chinese data. The rather far fetched prospect of direct intervention in currency markets by the US Treasury has remained a topic for discussion, with various major sell side houses such as Goldman Sachs opining on the remote possibility. As of yet, the Trump administration has not made any formal moves towards intervening to weaken the US dollar, although the President himself has been vocal on twitter about wanting looser monetary policy. After last week’s extraordinarily dovish testimony from Jerome Powell, it seems like little could dissuade the Federal Reserve from cutting rates this month, but Retail Sales data will be released today at 13:30 BST and offers at least a slight opportunity for an upside surprise. Powell is speaking at 18:00, although no comment on the outlook for rates is likely, or indeed necessary after last week’s unambiguous signal that rate cuts are coming. Powell will be followed by Chicago Fed President Charles Evans, who will be interviewed by CNBC at 20:30.


The loonie was among the weakest G10 performers yesterday as oil feigned a rally mid-afternoon, but sold off sharply after. The relatively contained damage of the cyclone Barry to oil producing facilities in and around the Gulf of Mexico eased fears about supply distortions, which dragged on WTI crude prices. Foreign Security Purchases are out today at 13:30 BST.