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July

GBP unaffected by Government turmoil

Published: Monday 09 July 2018

  • USD weaker ahead of inflation data
  • Canadian Dollar poised for interest rate hike
     
​​By David Johnson
 
Well that was a heck of a game; tense, edge of your seat stuff with drama and bad language thrown in but a convincing result in the end…and then David Davis resigned and the whole deal looked to be in jeopardy again. After the falling out over her softer Brexit plans, Theresa May has banned ministers from expressing their own views as she faces a serious rebellion at a time when the final i’s and t’s should be being dotted and crossed. Sterling didn’t fall though, which was a surprise. Oh and there was a successful football match for England supporters as well. Phew.
 
Mind you, that may pale into insignificance is the trade wars between the US and the rest of the world escalate much further. France is calling for specific taxes on US tech companies and Russia has increased import duties on a range of US goods. It’s all kicking off in Russia (did you see what I did there?).
 
Last week ended with improved US employment data but the USD, which had been very strong throughout the week, lost a little ground on profit taking and ahead of this week’s US inflation data. With the Federal Reserve seemingly uncertain about the timing or pace of the coming interest rate hikes, any hint of overheating on consumer inflation will be seen as a positive for the USD.
 
Central banks are the overriding theme of the week ahead. The Bank of England (BoE) and European Central Bank (ECB) are in the news today as Deputy Governor of the BoE, Dr Ben Broadbent speaks today and ECB President Mario Draghi does likewise. BoE Governor Carney will speak on Wednesday, the ECB has a monetary policy meeting on Wednesday as well and the Bank of Canada is likely to raise interest rates this week. So, such is the unpredictability of central bankers and the analysts thereof, that there is scope for volatility even if they stick to the script.
 
As for the Bank of Canada, it seems that, if you are a Canadian Dollar buyers, you will limit your risk of a stronger CAD by trading before Wednesday. Obviously there is no certainty the Bank of Canada will raise the base rate but the markets have partially priced in some sort of hike.
 
For at least 20 million people in England, the only event of the week ahead is the England v Croatia game in the World Cup. Nuff said.
 
Oh and the week ends with a Friday 13th to navigate. To be fair, that used to be a lucky day but not if you were one of the Knights Templar and lived in 1307 AD in France. More of that later.
 
Have a good week.
The new bull
 
Farmer Croft went out to get a new bull to service his cows. His old bull was past his prime and had been put out to pasture. He put the bull in with the cows but nothing happened. Weeks went by and still the bull showed no sign of interest in the girls.
 
So the farmer asked the vet what he could do. “Well Mr Croft,” said the vet. “He’s quite young but I think we can sort him out. Give him this liquid once a day. Just a drop on his tongue and he’ll be busy in no time.”
 
Farmer Croft was delighted when, with the first drop on his tongue, the bull really perked up. He was off into the field and within a week he had mated with all the cows in the upper field, then headed down to the fields by the river to service that herd and had even swum across the river and mated with all of Farmer Jones’s herd.
 
Farmer Jones rounded the bull up, loaded him into a stock trailer and towed him back round to the Croft’s farm.
 
“I don’t know what’s got into your young bull there,” said farmer Jones.
Farmer Croft apologised and then explained the story of the miracle liquid the vet had prescribed.
 
“What is this stuff called?” asked farmer Jones.
“I don’t actually know,” said farmer Croft, “But it tastes a little like aniseed.”

Today's Major Economic Releases

Market BST Data/Event Previous Expected
EUR 09:30 EU: Sentix Investor Confidence 9.3 12.1
EUR 14:00 European Central Bank President Draghi Speaks    
EUR 16:00 European Central Bank President Draghi Speaks    
USD 20:00 US: Consumer Credit 9.3b 12.2b

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