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June 2017

Sterling rises after positive Bank of England (BoE) comments

Published: Wednesday 28 June 2017

  • Sterling rises after positive Bank of England (BoE) comments
  • Euro boosted by hints at European Central Bank Quantitative Easing unwinding
  • US Dollar weaker on higher oil prices and healthcare delays
By David Johnson
The Euro is having a very healthy rally and that was further fuelled yesterday by an upbeat speech from European Central Bank (ECB) President Mario Draghi. His hints that the ECB might start to scale down their bond ownership; unwinding their quantitative easing project, caused the Euro to push above USD 1.13 and to push the pound down below EUR 1.13. That brings the Euro to a 10-month high against the USD as traders start thinking of a bond sell-off perhaps as early as September. I would caution though that a lot can happen three months, so this isn’t a one-way street. There isn’t a lot of Eurozone data today, but we will get more central banker speeches…whoopee!

The US Dollar was also weakened by higher oil prices and rumours of delays in the Healthcare Bill. That allowed the Pound to make gains against the US Dollar as well and that move was helped by rather positive comments from the Bank of England Governor. The GBP-USD rate is pushing $1.28 as Sterling benefits from little or no news for once. A lack of political nonsense is seen as a positive after weeks of far too much of it. This morning’s Nationwide House Price Index showed a slowdown in the rate of UK house price inflation at 1.8% on the year and flat on the month.

This afternoon brings us US house market data, along with the aforementioned central bank speeches from the heads of the ECB, BoE, Bank of Canada and Bank of Japan. All could be market moving, especially if Carney or Draghi seek to qualify or tone down yesterday’s bullishness.

Overnight tonight, we will get Confidence Indices from Australia and New Zealand, as well as new Home Sales data from Australia. Both the Australian and New Zealand central banks are in a quandary, because they boast the highest interest rates in the industrialised world and that keeps investors interested. The problem is that inbound investor funds also strengthen the currency and that damages export sales. However, a rate hike would probably be good for both domestic economies, but that would exacerbate the situation.  To hike or not to hike? That is the question. In the interim, expect the Australian and New Zealand Dollars to remain strong for now.

And there have long been calls for more video referrals in football. It happens in cricket, tennis and rugby, but not so far in football. However, where is it used, researchers at KU Leuven university in Belgium warn that it should be used with caution. Their research shows that referees are more likely to give red cards rather than yellow for fouls when shown the action in slow motion. They found that fouls tend to look more dramatic in slo-mo. Interesting, but kind of obvious and something the Sky rugby commentators comment on regularly.

The decider

Hours after the end of the world, a border dispute emerged between Heaven and Hell. God invited the Devil to a meeting to find a way to quickly resolve this dispute. Satan proposed a football match between Heaven and Hell; the winners to choose the border.

God, always fair, told the Devil, "The heat must be affecting your brain, the game would be so one-sided. You must know all the world class players go to Heaven!"

The Devil smiled and said, "Yup, but we've got all the refs." 

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