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June 2017

Sterling up on Bank of England (BoE) optimism

Published: Friday 30 June 2017

  • Sterling up on Bank of England (BoE) optimism
  • US Gross Domestic Product (GDP) growth upgraded
By David Johnson
Sterling had a better day yesterday after the Prime Minister won the vote on the Queen’s speech by a slim 14 vote margin. I would guess the Pound would have been even more ebullient if the Bank of England’s Chief Economist hadn’t warned that slow wage growth would make any interest rate rises limited and gradual. Add in a drop in consumer confidence with a minus 10 index reading and it is perhaps surprising that the Pound is pushing at USD 1.30 and is at the upper end of the EUR 1.13 range. The only UK data of note today is the final release of UK GDP growth for quarter one of 2017. 2.0% was the annual rate shown in the previous estimates and we suspect that will be confirmed. It’s up on Q4 but many are nervous about the prospects for Q2.
We got the final figure for the US economic growth in Q1 yesterday. That was revised higher to 1.4% on the year and the US Dollar should have strengthened but it barely moved. The markets appear to be realigning on the basis that the US Federal Reserve will be just one of many central banks lifting their base rates this year.
The Euro is pushing the US Dollar up above $1.14 as traders start to position themselves ahead of what they perceive to be a period of European Central Bank (ECB) tightening. The ECB has hinted at reducing its bond ownership as they unwind their Quantitative Easing programme and that will probably impact investors more than anyone else. We will get Eurozone inflation data this morning; forecast to be a little lower than last month’s 1.4% but not so much as to cause concern.
This afternoon brings Canadian economic growth data which, by way of contrast with the UK, ought to be up on the previous month. The Canadian Dollar has been loosely tracking the USD but this could break that lock-step.
And that’ll end the week, the month, the second quarter of the year and the first half as well. So be careful out there. This is an obvious time for traders and investors to unwind some of their open trades to take profit and to reduce risk. That generally means we will have volatility around the UK and US closes.  Taking advantage of that or protecting against it is fairly straightforward. Ask your Halo Financial contact for some of the tips and tricks of the trade.


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Today's Major Economic Releases

Market BST Data/Event Previous Expected
GBP 14:30 UK: The Conference Board Leading Index -12.1b -17.2b
USD 18:00 US: 10-year Bond Auction 2.0 2.2
USD 19:00 US: Federal Budget Balance -44.2b -99.5b
NZD 21:45 New Zealand: Manufacturing Sales 2.2% 2,2%


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