EUR – Despite a decent amount of EU data released today it is still likely to be Thursdays ECB meeting that provides the most interest, really whether ECB continue with their dovish tune or whether they turn mildly hawkish, beginning with the level of asset purchases. Before then we have GDP although this is the less exciting final reading, while German ZEW generally fails to move the market despite much hype. EURUSD 1.2170 having tested and failed around 1.2200 yesterday evening.
GBP – A lot of focus on EU and whether they will reconsider the NI protocol which is proving to be something of a problem. UK firms are struggling to work with the deal, some accusing of EU deliberately making life difficult, with EU saying UK should abide by its legal obligations. Biden has warned UK not to go back on the deal, to do so could harm UK/US trade talks, but he’ll also likely tell the EU they should be more flexible. Some suggestions that UK knew the NI protocol was a bad idea but agreed it to get Brexit done, with a view to renegotiating later. Watch this space.
GBPUSD now 1.4135, it did test high 1.41s yesterday but failed as it had done a couple of times last week, for now we are stuck in pretty much a 1.4100-1.4200 range. The EU/UK tensions have done little to EURGBP, now at 0.8605 (GBPEUR 1.1620) just where it was this time yesterday morning.
China – Just a quick mention on this $87 billion reverse repo recorded in April, compared to just $2 billion this time one year ago. No one seems to be able to explain the need for such a dramatic increase but there is some thinking that it could be the result of some stealth intervention by China to slow or prevent CNY appreciation.
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