Investors coming home – Sterling boosted by BOE and CFO survey
Sad to see the England team miss out on the Euro 2020 win but, if you are going to lose, Italy (unbeaten in 34 international games now) is a worthy winner. Football may not be coming home but investors are moving towards the UK. Sterling has made broad gains over the last couple of days.
Strong words of hope on the recovery in the UK economy from BOE Governor Bailey and a very solid rise in business investment shown in a survey of British CFOs by Deloitte, have brought investors home to the UK. So Sterling tested USD 1.39 overnight, although it is a tad lower as I write. GBPEUR joined in by testing EUR 1.17 and it is still battering away at that ceiling this morning.
Sterling’s gains have also manifested themselves in higher rates elsewhere. The GBPAUD is currently AUD 1.8560, GBPNZD is testing NZD 1.99 and the GBPCAD is at CAD 1.73 for the first time since April.
JPY buoyed by Machinery Orders
The big mover overnight though was the Japanese Yen. A massive 7.8% rise in machinery orders in May was three times the expectations and it brought the year-on-year growth to 12.2%. That was double the forecast. Understandably the Japanese Yen strengthened, gaining a full Yen against the Pound, which starts Monday at JPY 152.50.
Those with sore heads this morning will probably be glad to hear that the data diary is a quiet affair today. We have some regional data from the eurozone but that is unlikely to change the fate of the euro itself. We have a speech from the president of the New York Fed later. Whilst John C Williams is a member of the Fed’s Open Market Committee, we are not expecting any policy hints in this one.
The rest of the week brings a lot of opportunity for volatility. The Reserve Bank of New Zealand will, no doubt, leave their base rate on hold but are likely to signal relatively early hikes for the future. That could boost the NZD. We will see US, NZ and EU inflation, UK and Australian employment data, Chinese GDP growth and the week finishes with US retail sales.
And if English football fans need cheering up, it is International Etch A Sketch Day. So get your fingers twiddling. I have seen Buddy the Elf in action, so I know it is possible to create masterpieces with the aluminum powder and knobs.