A fresh day brings fresh lows on sterling as the pound continues to get dragged into the doldrums with negative Brexit sentiment. This morning, former Brexit Secretary and current Foreign Secretary, Dominic Raab, announced that £4bn has been set aside for leaving the EU, with further funds set to be announced by the Finance minister. Elsewhere, Johnson has announced plans to release £300m of new funding into the rural areas of devolved nations, in a bid to increase popularity in sections such as rural Scotland where polls suggest he remains severely unfavourable. Travelling North with the funds, Johnson will also make his debut speech as PM in Scotland in a military base. Johnson defied advice and removed David Mundell as Scottish secretary last week and replaced him with Brexiteer Alistair Jack, which many saw as adding wind into the SNP’s sails as Scotland rebels the hardline Brexiteer’s stance. With Johnson in Scotland, Michal Gove will host the bi-weekly Brexit cabinet meeting this week which is composed of six senior ministers who will make the important decisions regarding Brexit policy. On the data calendar this week, the Bank of England meets on Thursday and will face questions over their base case Brexit scenario of “an orderly and smooth exit” as domestic policy jolts their economic forecasting models.


The dollar is trading marginally higher against most of its peers this morning ahead of an immense week of data and central bank action. This upbeat sentiment around the dollar can be influenced by Friday’s First Q2 Gross Domestic Product reading, which came in above the 1.8% expectation at a very healthy rate of 2.1% annualized. There is also a feeling of positive sentiment spilling over from Friday’s session where White House advisor Larry Kudlow announced there will be no intervention by the Treasury department in markets to synthetically weaken the dollar. This has been compounded this morning by positive trade news as Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer travel to Shanghai for the first face-to-face negotiations since trade talks broke down in May. On Wednesday, the Federal Reserve is universally expected to cut interest rates, to the point where the dollar reaction entirely depends on the tone of the associated statement and press conference. Given OIS pricing still implies expectations of a full three cuts by December, there is real potential for the Fed to signal less dovishness than currently expected by markets, and cause dollar strength. Although Wednesday’s Federal Open Market Committee is the main event for the dollar this week, plenty of significant data releases are scheduled. Personal Consumption Expenditures data including a price index will be released on Tuesday, Markit and ISM Purchasing Managers’ Index surveys are our on Thursday, and the Non-Farm Payrolls report will be released on Friday.


After a long digestive period, markets seemed to come with their final verdict for Thursday’s European Central Bank meeting on Friday. The eventual judgement was that there is little upside for the single currency at the moment with the ECB so clearly considering the use of the full pallet of dovish measures. These measures currently range from rate cuts and a restarting of the Asset Purchasing Program to more technical accommodative measures like tiering. This week is chock full of important Eurozone data, with Q2 French and Spanish Flash Gross Domestic Product on Tuesday and Wednesday. Also, German and Eurozone Flash July inflation figures will be released on Tuesday and Wednesday respectively, with a grand finale on Friday that consists of producer inflation and Retail Sales.


After cracking fresh month-to-date highs on Friday, USDCAD continues to sit on the back foot as the US dollar takes the G10 currency board as prisoners. The loonie is faring the cross-winds relatively well compared to its G10 counterparts but is rapidly approaching key psychological levels. This week’s data calendar could help a bounceback, with May’s GDP release pencilled in for Wednesday prior to the dovish Federal Reserve meeting. At such low levels, speculative market positioning remains bullish for the loonie as economic fundamentals paint the currency in a positive light. On the week ending July 23rd, CFTC data showed asset managers raised their net CAD long positions to levels not seen since March 2018.