- Euro dips on ECB member comments
- USD stronger as oil drops
- No change expected from Reserve Bank of Australia
By David Johnson
Wow, it’s July already.
The Euro started the new month and the 2nd half of the year with a slight backward step after Yves Mersch, a member of the ECB’s board, added his voice to that of his German colleague Jens Weidmann. They both feel the ECB’s € 2.3 trillion Quantitative Easing program and the period of virtually 0% interest rates revived the economy but have concerns over whether the economy is revived enough to withstand higher rates and less monetary stimulus. If that delays these consequences, the Euro will remain weak while central banks elsewhere gear up for rate hikes. ECB minutes on Thursday should confirm their thoughts but if they are proven to be in the minority, then the Euro will be volatile.
The US Dollar strengthened a little after oil prices ended in Quarter two, 9% down on the three month period. That was against the run of play and in spite of OPEC output cuts which few believe will be delivered or sustained. This is a big week for US data culminating in Friday’s employment report. Before Friday though, we will get confidence indices from all sectors of the US economy and a stack of other data.
Sterling is in betwixt and between, as has become its default setting. Nervousness over Brexit is offset by surprisingly positive data and we expect more of both this week. There are rumours circulating that the first round of discussions between the UK and EU may result in the UK walking out if the EU negotiators insist on the eye watering €100 billion exit fee that has been widely touted. Once again, the opening salvos of any negotiation tend to be outrageous. We will though get Purchasing Managers Indices from the manufacturing, service and construction sectors for the UK this week and the forecasts are all positive. GBP strength will follow if the forecasters are accurate.
This week also brings a smattering of data from elsewhere. Overnight tonight we will get an interest rate decision for the Reserve Bank of Australia. No change is expected but, as always, the tone of their statement will hold the fate of the AUD in its hands.
We will see Canadian housing and employment data this week and those too are forecast to be upbeat. The CAD will be moved in one way or another, so automated orders may be your savviest option.
And, if you aren’t a rugby fan, I apologise for my enthusiasm but the British and Irish Lions scored a famous victory over the New Zealand All Blacks on Saturday. It was the first All Black defeat on home soil for 8 years and was partly a factor of, probably their best player being sent off, but that is all part of the game. The decider in a week’s time will be a tense affair but, if both teams play to their potential, it should be a corker.