Burnham outlines his plans for the UK

Good morning

Well here we are, the end of Q2 and the end of H1.  Seems to have gone absurdly quickly, half way through the year already.  Time flies when you’re having fun, I guess!

I listened to Burnham speak yesterday.  Overall I cannot say I was impressed.  I thought he was quite divisive, happily separating London from the rest of the country.  Now, I am closer to London so maybe I am biased or simply not aware of the huge unfairness that other areas have to face, but the idea of moving the PM’s office to number 10 North suggests his aims are more to do with teaching London a lesson than any serious political initiative.

For GBP, while there may be some sort of short term support led by hope and optimism that this time it’ll all be different, the Burnham bounce as some have called it, at some point it’ll be about whether markets believe Burnham’s approach is credible and will work without putting any further stress on UK’s already stretched finances.  For a start, the idea of putting local councils in charge of more money fills me with dread.  I remain sceptical.   

GBPUSD did trade to a high of 1.3260 yesterday evening but I’m not sure this can be attributed to Burnham given EURUSD also pushed higher around the same time, reaching 1.1430 although this morning GBP is up a little against EUR at 1.1610.  The EU are reported to be setting up trade talks with China aimed at reducing the widening trade deficit.  GBP is at 1.9250, 2.3415 and 214.75 against AUD, NZD and JPY respectively, the latter pushing higher as USDJPY finally breaks above 162.00, now 162.20 having seen a high around 162.40 earlier this morning. 

Japan’s FinMin Katayama has once again given it a bit of the old ‘we are ready to act’ speech but for now her comments have fallen on deaf ears. There remains a feeling that Japan will intervene again at some point but this would really only slow the pace of Yen depreciation rather than turn the trend.  I still wonder whether Japan could take advantage of the reduced liquidity over the US holiday later in the week, early hours of Friday morning perhaps, but it does seem as though Yen weakness is here to stay and 150’s/160’s will become the norm rather than the 130’s/140’s.

In sport, both Germany and the Netherlands have been sent packing from the world cup, both beaten on penalties.  Germany were perhaps unlucky to have had a late goal ruled out for a foul on the keeper after VAR disallowed it.  This evening we’ll have Ivory Coast v Norway and France v Sweden.  Norway and France are favourites to win their respective matches, I wonder whether we’ll see any upsets this evening?

Today’s calendar has plenty of central bank speakers at ECBs forum in Sintra.  US JOLTs data is the first of the week’s US jobs data although unlikely to have a major market impact. 

Have a great day…

-  09.40 ECBs Elderson speaks

-  11.40 ECBs Schnabel speaks

-  11.40 BoEs Breeden speaks

-  13.00 German HICP

-  13.00 ECBs Cipollone speaks

-  13.30 CAD GDP

-  14.00 US house price index

-  14.30 ECBs Lane speaks

-  14.45 US chicago PMI

-  15.00 US JOLTS, consumer confidence

-  00.50 Japan tankan survey

-  02.30 AUS building permits