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July 2016

Sterling edgy ahead of potential BOE rate cut

Published: Monday 11 July 2016

  • Sterling edgy ahead of potential BOE rate cut
  • Chinese inflation eases – more Yuan weakness on the way
So what are we going to have to do to make football interesting to watch? 90 minutes without a single goal is pretty tedious. Might I suggest they increase the number of players to 15, allow them to run with the ball in hand and award points for either kicking the ball over the net or getting it into the goal kick area. More points and much better entertainment would ensue.
In the markets, Friday finished with much better than forecast US employment data. New Job creation was more than 100,000 above the forecasts in fact, so the US Dollar had to strengthen in spite of the Federal Reserve's reticence over interest rate hikes. The GBP-USD exchange rate is at a level not seen since June 1985. However, Sterling is only at a 2 and 3 year lows in other exchange rates. That is proof positive that the US's safe haven status is intact and in full effect.
Overnight we heard that Chinese inflation has eased but not as much as most analysts expected. At 1.9%, it was a tad up on their estimates and a smidgeon down on the previous month. It does suggest the Chinese authorities are likely to carry on weakening the Yuan.
The week ahead is not awash with data but some of the figures will be the first post-Brexit data we have to work with. Business and consumer sentiment indices will be most interesting and we'll get Eurozone industrial production which, if the German data is anything to go by, will be poor. We'll also get Chinese inflation and industrial production data. Given what they are doing to devalue the Yuan, we suspect the data is likely to be poor, so the Aussie and Kiwi Dollars may well be weakened on the news.
However, the big event of the week is the Bank of England's interest rate decision on Thursday. Many are predicting a rate cut of between 25 and 50 basis points. If it is the latter, then UK interest rates will be at zero. Sterling is already very weaken and it is debateable whether such a move would weaken the Pound or strengthen it due to the perception that the BOE would be acting pre-emptively (for the first time since they were given independence, in my opinion). Either way, Sterling is set for another post Brexit bouncy week. There are steps you can take to avert the worst of the volatility or take advantage, so speak with your Halo Consultant to see how you can take those steps.
And what a weekend for sport we had. Andy Murray is so very British this morning after his 2nd Wimbledon win and Lewis Hamilton is just a point away from the F1 Driver's championship lead after avoiding all the drama the weather caused at the British Grand Prix and controlling the race from the off. Add in the Brits doing so well in the Tour de France and things look pretty good or UK sport.

Wedding night

A very wealthy 85 year old man marries his 27 year old house keeper. Before they marry he says to her, "I have to warn you that I snore very loudly, so I have arranged for you to have your own suite in the house so that I don't disturb you, although I will knock if I am feeling fruity. I hope that arrangement is OK for you."

She finds that very sweet and a bit of a relief if she is honest.
On their wedding night, she is getting into bed when there is a knock at the door. Her new husband is outside with a naughty grin on his face. She invites him in and they do what newlyweds do on their wedding night. After a while he leaves.
She has only been asleep a while when there is another knock at the door. There he is again looking expectant and she invites him in again. They make love before he gets up and leaves for the second time that night.
45 minutes later there is yet another knock at the door. When she opens it she says, "Wow, I can't believe you are this virile. Three times in one night!"
He looks at her a little confused. "So let me get this right. You are saying I have been here already!"

Today's Major Economic Releases 

Market BST Data/Event Previous Expected
EUR All Day Eurogroup meetings    
CAD 13:15 Canada: Housing starts 189k 192k
USD 15:00 Labor market conditions index m/m -4.8 -4.8

FX Research by David Johnson

Daily Currency Analysis with Michael Hart

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