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  • richard evans

EUR falls despite ECB signalling July rate rise

Good morning

ECB yesterday kept rates on hold and end QE, and signals a rate rise for next month as expected. This wasn’t however enough to keep the hawks happy, and EURUSD fell back to 1.0650, and on to 1.0610 overnight from a high of 1.0775. Perhaps the downgrade to growth forecasts and upgrade to inflation forecasts also dented the single currency even though these were widely expected as well.

Lagarde did add that if inflation forecasts remains above target by the next update in September, ECB will look at a 50bps rise. Even this offered no support for EUR, which trades at 1.0630 as I type. French elections this weekend, I believe this is the first of a couple depending on winning percentages, Macron needs 289 for a majority.

US dollar has also found support as economists look at the chance of a 50bps from the Fed coming in June, July and perhaps even Sept. UBS has gone so far as to say Nov will also see a 50bps rise. US inflation numbers out this afternoon, risks must surely be for a number higher than expected.

The stronger dollar had helped push USDJPY back to the 134.50 area overnight but once again it fails there and now trades 100 pips lower in mid-133’s. If that sounds familiar, its almost an exact repeat of what I wrote this time yesterday. Japan continues to talk of the need for stability in the FX markets but we also know they don’t really mind a weak yen. 134.50 becoming quite an important area mind you.

Next week the UK is likely to unveil tweaks to the NI Bill to override part of the Brexit deal. The EU are looking at a response in the form of legal proceedings.

The weather over the weekend is looking good and temperatures look set to rise to 25 degrees next week so make sure you get outdoors and enjoy the sunshine while you can. The air will smel like a mixture of fresh cut grass and slightly overdone barbecued sausages. Lovely.

Finally, I’ve just been reading about a shipwreck of The Gloucester which ran aground back in 1682 off the Norfolk coast. The wreck was found back in 2007 but it has only just been revealed due to its historic significance. Whoever thinks the authorities don’t hold secrets should think again. The Duke of York, who later became King James II was on board when it sank. It’s pretty incredible to think that parts from a boat some 340 years old is lying on the sea bed.

I’m not sure what is more amazing though, the Gloucester being found, or the fact that Richer Sounds has a 58 inch UHD smart TV with a six year warranty for £349. What inflation?

- 09.30 UK consumer inflation expectations

- 13.30 US CPI

- 13.30 CAD unemployment

- 15.00 US Michigan sentiment survey

- 20.30 CFTC position data

- Monday

- 07.00 UK GDP, trade balance, industrial production

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