UK | Sterling
BoE Policymakers Split on Interest Rates
Last week, the pound began under pressure following Theresa May’s failure to win a majority vote at the UK general election. With Brexit negotiations about to begin, there is a cloud of uncertainty and fear that internal conflicts of interests between parties will hinder the UK’s ability to agree favourable new terms with the rest of the EU.
UK retail data also disappointed but the pound enjoyed a more positive end to the week after the Bank of England (BoE) meeting on Thursday. The UK left monetary policy frozen at its loosest levels on record but there was a highly unexpected level of disagreement amongst policymakers. Following the previous 7-1 vote, UK inflation levels have continued to soar. With pressure on the BoE to act, three members voted to hike interest rates, leaving a 5-3 split. Thanks to hawks Kristin Forbes, Ian McCafferty and Michael Saunders, the central bank saw its closest voting split in almost a decade which has helped to support the softer pound.
The week ahead is quiet in terms of economic data, meaning a lot of the market’s focus will be on the Brexit negotiations which begin today.
Europe | Euro
Single Currency Performing Well on GBP and USD Softness
The euro has performed well of late and has been the main benefactor of USD and GBP weakness. Last week kicked off with the release of better than expected German ZEW data, Wednesday saw German inflation data remain at 1.5% but Eurozone manufacturing data did drop from the previous reading. A light data week for Europe ended when Eurozone inflation numbers printed in line with expectations.
With a quiet week ahead in terms of eco-stats, all eyes will be on the Brexit negotiations between the UK and Europe.
USA | US Dollar
Will Trump Developments Cause USD to Fall?
The greenback performed well last week and recovered part of its recent losses against the pound and euro. The main-focus was firmly on Wednesday’s Federal Open Market Committee (FOMC) meeting which saw the US raise interest rates for the second time this year despite a drop-in inflation. The rate hike was largely expected and therefore priced into the market, but it does keep the US on track for the three or four rate hikes forecast for 2017 which are largely built into the dollar’s value. There was also a drop in oil inventories which helped to support the dollar.
A light week again in regards to data could the see focus back on Donald Trump who has endured a bumpy start to his presidency. He has seemingly survived the testimony provided by former FBI director James Comey, but the fallout could be fatal and shadow his presidency for years to come. Any further allegations towards the president could cause additional volatility for the greenback.
Other
GBP/NZD Tumbles 7%
The GBP/NZD rate has fallen over 7% since reaching 1.9 last month. The antipodean nation has performed well considering the overall drop in commodity prices and all eyes will be on this week’s Reserve Bank of New Zealand (RBNZ) interest rate meeting on Wednesday. Most analysts expect the rate to be kept on hold as the RBNZ will be fearful of the currency appreciating whilst commodity prices remain under pressure.
Data
GBP & EUR - Formal Brexit Negotiations Begin - Today
GBP - Mark Carney Speaks at Mansion House - Tuesday
EUR - Eurozone Consumer Confidence - Thursday - 15:00
EUR - Markit Manufacturing / Services / Composite PMI’s - Friday - 08:00
USD - Markit Manufacturing / Services / Composite PMI’s - Friday - 14:45
USD - New Home Sales - Friday - 15:00
Current rates:
Monday 19th June 2017 at 16:35
£1.00 GBP = 1.1407 EURO
£1.00 GBP = 1.2737 USD
£1.00 GBP = 1.6758 AUD
£1.00 GBP = 1.7583 NZD
£1.00 GBP = 1.6806 CAD
£1.00 GBP = 16.4789 ZAR
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