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July 2016

Sterling steadies as Capital Gains tax likely to be cut

Published: Monday 04 July 2016

  • Sterling steadies as Capital Gains tax likely to be cut
  • Aussie hung parliament worries don't affect credit rating
  • RBA rate cut talk likely but no cut yet

Happy Independence Day. I am talking to all the America there; I know the UK has just voted to reclaim ours but, as with so many new things, we lag the USA a little. And America, you may have thrown off the shackles of Britain but there is one thing that remains forever British. If you ask an American for the date, they will always say June fifth or May seventh but when it comes to Independence Day, they all refer to it as the fourth of July. That's a very British date structure and for that we are eternally grateful.
Because of the essential need for charred barbeque food and fireworks, the US markets will not be open today, so it is almost impossible to get same-day delivery on any currency. Please be aware that trades booked today will be booked for next day settlement at the very earliest.  It also means the markets will be quieter but that could also increase volatility.
And speaking of volatility, let's talk about the Pound. After two tumultuous weeks, Sterling has steadied a little after a weekend of campaigning by the PM hopefuls, a number of reports about other countries hastening their discussions with the UK re trade deals and after Chancellor Osborne announced a plan to bring UK corporation Tax down to 15%. That would make the companies threatening to move their head offices overseas have another think. Maybe the UK should be a tax haven; it seems to keep the small Caribbean islands in business.  
There is a lot of debate on the news-wires about whether the UK Brexit vote is to the EU what the implementation of glasnost and perestroika was to the USSR; a turning point that led to the deconstruction of the super-state. Who knows but I am old enough to remember the lines of Trabants are the East/West German border and I don’t suspect we will have similar scenes but there are lessons to be learned from trying to amalgamate disparate economies under one set of rules and the EU will need to adapt if it is to avoid a similar fate.
Interestingly, despite the possibility of a hung parliament after Australia's election vote, the Aussie Dollar has strengthened a little this morning. The ratings agencies were quick to say that Australia's AAA rating is unaffected and maybe that calmed things but the lack of a US market will also have had an impact. Whether the AUD will weaken tomorrow is another question though. I guess it depends on the hasty negotiations going on behind closed doors in Australia right now. Unnoticed in the midst of this melee was the data showing a sharp drop in Australian building approvals. That doesn't bode well for whoever take office. The Reserve Bank of Australia makes its interest rate decision overnight tonight and, whilst few are expecting a rate cut right now, there is an outside chance of a move or hints of a cut later in the year. Beware the Aussie Dollar weakness if that happens and, if you are a buyer of Aussie Dollars, you may wish to have an automated Limit order in the market overnight.
Other than this, Astrophysicist, Neil deGrasse Tyson has got some of us thinking. He believes we are in a zoo run by aliens who just keep us here because we entertain them.  But don't worry about us being destroyed by aliens (a very apt thought on Independence Day). Neil deGrasse Tyson says we wouldn't be worth the hassle. Maybe L'Oréal is wrong then. So there's a cheery thought to send you off into Monday.  

4th July Quotes

I always forget it's America's birthday since I’m not friends with it on Facebook.
Leon from Mathclass ‏
Happy 4th of July! I hope you take this time to celebrate one of the most important things about being an American: 3-day weekends.
Ellen DeGeneres
Guys with an eye patch and two missing fingers sell the best fireworks.

Today's Major Economic Releases 

Market BST Data/Event Previous Expected
EUR 09:30 EU: Sentix investors confidence 9.9 8.1
GBP 09:30 UK: Construction PMI 51.2 50.6
EUR 10:00 EU: PPI m/m -0.3% 0.3%
CAD 14:30 Canada: RBC manufacturing PMI 52.1 52.1
NZD 23:00 NZIER business confidence 2 2

FX Research by David Johnson

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