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July

Sterling recovers some ground

Published: Monday 02 July 2018

  • Multiple problems for EU
  • Purchasing managers Indices dominate the date diary
​​By David Johnson

Phew it’s another scorcher in London. I hope you had a great weekend. I am in mourning for the Portugal team’s exit from the World Cup. I am not Portuguese but I had them in the office sweepstake, so I have been an honourary Portuguese for the last few weeks and I don’t even like Cristiano Ronaldo.
 
June and the first half of the year ended with a whimper rather than a bang. Trade tension between the EU and US continues, as does the interminable rhetoric over the Brexit deal. Angela Merkel’s domestic hassles are being exacerbated by the refusal of one of her ministers to resign and by chiding from Italy. The EU migrant crisis remains a central feature of all of that.
 
That has left the Euro at the weaker end of its trading ranges against all but the poor old Pound. Today’s purchasing managers indices will be interesting reading for the ECB as they try to decide whether they have acted too soon in calling an end to Quantitative Easing. Mind you, how ending anything that has lasted a decade or more could ever be considered ‘too soon’ is an open debate.
 
Sterling regained a little of the losses it had suffered earlier in the week but is barely at €1.13 and $1.3150. We will get the UK manufacturing PMI this morning and that is forecast to be in the growth zone but a tad less ebullient than last month. Sterling is unlikely to do much if that is the case.
 
US personal income and expenditure data was in line with expectations, so the USD was largely unaffected. This afternoon’s manufacturing data will set the tone for the week ahead as far as the USD is concerned.
 
The Canadian economy beat expectations and did actually grow in the month to April but it was just 0.1% growth. However, raw material prices shot up by three times the forecast and output prices were a tad higher too. The Canadian Dollar had a decent day on Friday, strengthening mildly. The highlight of Canadian data this week is the employment report on Friday.
 
The rest of the week is a mixture of PMI’s and central bankers. The week will be disrupted (as far as the markets are concerned) and improved (as far as US citizens are concerned) by the Independence Day break on Wednesday. Then traders in the US will trickle back to their desks ready for the Friday release of the US employment report.
 
And if this is all too much for you, a group called Asgardia is recruiting people who will go on its space craft to live on space stations in artificial gravity. There may be IQ tests for potential members and they have a limited number of spaces. So good luck with your application but don’t panic. The first trips won’t happen for 10 to 15 years…if all goes to plan.
Premonition

My grandpa warned people the Titanic would sink. No one listened, but he kept warning them right up until the manager asked him to leave the Odeon.

Today's Major Economic Releases

Market BST Data/Event Previous Expected
CAD All Day Canada: Bank Holiday    
GBP 09:30 UK: Manufacturing Purchasing Managers' Index 54.4 54.1
EUR 10:00 EU: Producer Price Index 0.0% 0.4%
EUR 10:00 EU: Unemployment Rate 8.5% 8.5%
USD 15:00 US: ISM Manufacturing Purchasing Managers' Index 58.7 58.2

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