- Not a lot of data driving markets
- Euro sliding on economic and political issues
By David Johnson
Once you get past the lamentations over the dire England v Belgium football match and the ‘wot a scorcha’ type headlines, the newspapers are awash with views on the state of the haggling at the EU summit. I say ‘views’ and not ‘news’, because no one seems to have any facts. The reports seem to be based on the facial expressions of various EU leaders caught at inopportune moments. However, one theme that seems to run through many reports is that there may be a delay in the final date for Britain’s egress from the EU and that has weakened the Pound. That, in itself, is interesting. If the date were brought forward, would Sterling strengthen then? No one knows, but it is an interesting flip of the usual doom and gloom soothsaying.
Not a lot of data driving markets
To be fair to traders, there isn’t a lot of other data to focus on. We did get US economic growth data and that was a tad lower than forecast, but it is still at an annualised 2.0% and that is galloping by comparison with most other economies. The US releases also showed reasonable weekly Jobless Claims and a slight slowdown in the Personal Consumption and Expenditure Index. The USD barely twitched on the news.
Euro sliding on economic and political issues
The Euro slipped as German inflation fell to just 0.1% on the month. Add the pressure being brought to bear by Italy, France and others on Germany and the scene is set for some… shall we say, unpleasantness… in the months ahead. More than a few commentators believe if Angela Merkel is forced to step down, the EU will be under severe pressure. We will get German unemployment and retail data today and that is not expected to be pleasant, either.
Could the UK pave the way for EU-US trade?
I am intrigued to see what happens over the EU-US trade disagreement. If the EU and US fall out, but Britain maintains its ‘special relationship’ with America, could the EU use the UK as a springboard into the US market? What would that do for investment into Britain? I’ll just throw that in there and let you ponder.
Pound gets boost from growth data
We get UK investment data alongside the UK Current Account today, but the Gross Domestic Product (GDP) data is key for the Pound and has provided a welcome lift. UK GDP growth has taken a surprise leap forward after better results for the UK construction sector, boosting the Pound against the US Dollar. According to the Office for National Statistics, the UK saw 0.2 percent GDP growth for the first three months of 2018, as opposed to the 0.1 percent forecast. Markets now expect much greater chances of the Bank of England hiking interest rates in August, something that until only very recently seemed a long way off.
It is going to be a big last day of the month, the quarter and the half year and that is also a factor. Many traders will be squaring up their books before the end of the day and that often means an unwinding of the movement seen in the previous few days. If that is true, the Pound has room to strengthen, the US Dollar has room to weaken and the Euro has room to do either thing…
Have a fab day and an even fabber weekend and we can catch up on Monday.