Sterling took yet another pounding yesterday, reaching its lowest level against the dollar since April 2017, as upbeat jobs data did nothing to blunt the edge of the incoming Boris Johnson premiership. Johnson and his rival Jeremy Hunt had primed sterling for losses the night before by both ruling out the “Irish Backstop” remaining in any future deal with the EU. But it was a Sky News scoop that sent the pound reeling yesterday afternoon, reporting that Mr. Johnson could suspend Parliament in October to stop MPs from blocking no deal Brexit. Johnson’s camp denied the report, but from the pound’s perspective things continue to look rather grim. Yesterday’s jobs data offered a rare spot of cheer: Unemployment remained very low at just 3.8%, while wage growth reached its highest nominal level since the financial crisis and real wages climbed a healthy 1.7% year on year. Assuming savings intentions do not suddenly pick up, much of this wage increase is likely to filter through to consumer spending, hopefully lifting the economy in the second half of the year. Today at 09:30 BST, inflation data including the Consumer Price Index will be released.


The euro was broadly weaker across the board yesterday, despite more political certainty after German Defence Minister Ursula von der Leyen was confirmed as the new President of the European Commission. If every chain is as strong as its weakest link, Eurozone’s financial stability may be strengthening as Greek’s 7-year bond auction yesterday could count on a high level of interest which pushed down the required yield to 1.9%. This follows on the drop in 10-year Greek bond below 2% yield levels earlier this month, which shows improved access to bond markets and a more stable financial footing for the Hellenic Republic. Currently, its debt still has junk status according to the rating agencies, however, if the current trajectory continues and Greek debt reaches investment grade, this would make it eligible for European Central Bank Purchases. ZEW German Economic Sentiment meanwhile showed expectations of investors are heading down the drain. In line with what the Sentix Investor Index signalled earlier, the ZEW Expectations Index fell to -24.5 in July, below forecasts and lower than the -21.1 reading in June. This tells us a story that downside risks to growth remain for now in the Eurozone. Today sees Final Eurozone Inflation readings at 10:00 BST.


The greenback was crowned king of the G10 FX jungle yesterday as solid Retail Sales told a story of upwards risks to current Q2 growth expectations. Retail sales increased by 0.4% in June, above the 0.2% forecast, while also the core reading chipped in to the buoyant mood by increasing above expectations by 0.3%. While a certain White House inhabitant may be getting out the party decoration to celebrate the solid-state of the US economy, this data point may sit uncomfortably with the Federal Reserve. The Federal Open Market Committee has committed itself to at least one rate cut in July according to current market pricing, but after a steady June labour market report, stabile Core Durable Goods orders and now the blossoming Retail Sales, such a cut starts to appear increasingly premature. Today at 13:30 BST the Philly Fed Manufacturing Index will be released and on behalf of the FOMC’s reputation, you would almost start to hope for a dismal reading to prevent the macroeconomic base for rate cuts to be completely washed away by a steady stream of positive data surprises.


The loonie retreated slightly yesterday, having approached an eight-month high against the US dollar, but has regained some momentum overnight. Foreign Securities Purchases data confirmed what many of us who follow fixed income markets already saw coming from miles away; Canadian debt markets gain in appeal as yields continue to decline in Japan, Europe and of course the US. For the first time in three months, the security purchases by non-Canadian residents were positive to the amount of $14.78 billion (US$11.3 billion) in May. As the Canadian economy is performing well enough to resist the siren call of more monetary stimulation other major central banks have recently given into, this tailwind for the loonie may continue to stay with us for the coming quarters. Today’s calendar will be crucial for the Canadian dollar: inflation data will be released at 13:30 BST, accompanied by Building Permits and Housing Starts.