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  • richard evans

Currency markets steady as EU digests election results, big data day tomorrow

Good morning

 

After all the excitement from Friday and over the weekend, yesterday was a picture of relative calm.  GBPUSD traded to 1.2690 through the morning before pushing back to the 1.2725 area by the London close.  EURUSD traded down to 1.0730 before creeping steadily up to 1.0745, leaving GBPEUR at 1.1840.  Since then EUR has made a very slight recovery, with EURUSD at 1.0765 and GBPEUR 1.1815, Lagarde’s comments that ECB are still in a tight monetary policy and can now keep rates on hold for some time offering a touch of support. 

 

It is fair to say the markets are still taking stock of the EU political situation, in particular the decision by Macron to dissolve the French parliament and force an election and the resignation of the Belgian PM following a heavy defeat in Sunday’s elections. 

 

This morning’s UK unemployment numbers were disappointing, the unemployment rate was the highest for two years.  GBP did tick lower, GBPUSD shifting from 1.2740 to 1.2715 and GBPEUR from 1.1830 to 1.1815, not huge moves but the data was weak enough to have some market participants see more potential for UK rate cut next week.  The difficult issue for BoE is that wage growth still seems to be stuck at high levels, BoE would really like to see this start to come lower.

 

Today’s calendar is as empty as the bottle of wine I opened last night to celebrate my youngest passing his theory driving test.   He’s not the most academic, nor is he particularly good with exams having something of a short term memory issue, however with a few hours of cramming on the day he went in and absolutely nailed it, with a pretty impressive 48 out of 50 for one part of the test.  He was over the moon as you can imagine.

 

Not much to get excited about in the news.  I see the Baltimore shipping channel has fully reopened following the cargo ship accident some eleven weeks ago.  The bridge repairs could take four years and cost some £1.5bn.  I’m no structural engineer but I fail to see why so much time is needed.  I know it’s a difficult undertaking but surely it can be done quicker.

 

Tomorrow is the big day with UK GDP, then US CPI and the FOMC rate announcement, until then I would not be surprised if markets had something of a holiday feel to them.  UK GDP is expected to show a drop from last months 0.4% to something around 0.1%, if so it would be Q2 on track to show lower growth than Q1. 

 

With little else to offer I’ll leave it there, just a short message this morning.  You can drink your coffee in peace!

 

-  12.05 ECBs Lane speaks

-  02.30 China CPI

-  07.00 UK GDP

-  07.00 German HICP

 

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