ECB President’s dovish tone stalls Euro

This morning’s exchange rates are a little déjà vu in nature. There wasn’t a lot of data to change the mood on Monday. The Pound is still trapped below EUR 1.17 and USD 1.39.

Euro traders were interested to hear about the changes to the way the ECB will work. President Christine Lagarde teased the changes over the weekend and the details will be announced about forwarding guidance and their framework on the 22nd July. Lagarde was a little dovish in her tone, delaying any talk of normalising monetary policy for now. That kept the Euro on the back foot. Other than a smattering of inflation data from Eurozone states and a meeting of EU finance ministers, there isn’t a lot to move the euro today.

Sterling is on the front foot after another solid showing for year-on-year retail sales growth, as reported by the British retail Consortium overnight. 6.7% is not as strong as last month’s 18.5% rise but it’s still very positive. I suspect UK bank shares will rise after the BOE removed the restrictions it placed on dividends paid by banks. Those restrictions were in place during the pandemic. Logically, you would have to expect that to encourage inward investment into UK banks and that would strengthen the Pound to some degree.

Overnight we saw that year-on-year Chinese imports and exports were up 36.7% and 32.2% respectively in June. Both figures were above expectations and that ought to boost the fortunes of the countries which support China’s industry and manufacturing. We haven’t seen that at this stage. The Australasian dollars are pretty much where they were this time yesterday and other currencies that are affected by commodity prices are largely unmoved. So the Canadian dollar is also unmoved.

South African Rand dives due to riots

Another currency that also fills this category is the South African Rand but that is a very different picture. The GBPZAR rate shot up to R20.08 and is still above R20 this morning. The rioting over the imprisonment of former President Jacob Zuma has shocked the markets. Zuma has been jailed for contempt of court because he refused to testify over allegations of corruption and his supporters hit the streets in protest. 6 people have been killed and more than 200 arrested across South Africa.

USD awaits inflation, oil stocks and Bostic

There are three major things to watch this afternoon as far as the US Dollar is concerned. Consumer inflation is expected to have held around 5% on the year. That is pretty elevated but 2020 was not a normal year. US crude oil inventories have an impact on the price of oil and therefore the USD is impacted because oil is traded in USD. Crude oil has been on the rise while economies slowly get back to more normal levels of consumption. We will also have a speech from the President of the Atlanta Federal Reserve, Raphael Bostic; often a dropper of hints on policy decisions.

And today is also International French Fry Day. If ever a food product didn’t need a single day to celebrate it, then chips fit that bill. Every day is chip day in Britain. Does anyone else feel peckish?

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