Dealer Comments

10:38 24 May 2019
Morning Dealer Comments
Morning Dealer Comments

Flash GBP Update:

  • PM May has officially resigned as UK PM, outlining her intentions to step down on the 7th of June.
  • The PM outlined that her successor will need to find consensus on Brexit, but first we’ll have to go through the process of a Conservative leadership contest, and the timetable will be set by the 1922 Committee soon, with reports expecting the vote around 10th June.

Sterling initially strengthened after the announcement, but has reversed gains with EURGBP now eyeing up resistance at 0.8840 once again, while Cable now trades close to the lows of the day, with next level of support at 1.26.

 

EURO:

Some volatile moves in FX yesterday with EUR/USD breaking to fresh lows for the year post soft German manufacturing PMI/IFO readings, until the entire move was hastily reversed after the much weaker than expected US numbers. For the Euro, all eyes will be on European elections this weekend. The European elections themselves and events surrounding them are unlikely to have a material impact on markets, but investors will be closely watching to see levels of support for various populist candidates. Positioning in EUR/USD is heavily short, with levels on the topside to watch at 1.1260.

 

USD:

A sharp reversal in the DXY yesterday, which printed fresh yearly highs in the afternoon before dropping heavily on the US PMI numbers (manufacturing PMI fell to 50.6 vs. 52.6 exp., while services PMI fell to 50.9 vs. 53.5 expected). The narrative as such turns toward questioning US exceptionalism vs. the rest of the world, which has been a key theme for the Dollar since President Trump’s tax cuts were imposed in 2017. With risk sentiment nervous (markets now pricing 32bps worth of cuts from the Fed for this year), safe haven/funding currencies such as the JPY, CHF and EUR are outperforming.

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Author: Andrew Burns

23 May 2019

12:17 23 May 2019
Morning Dealer Comments

EURO:

It’s PMI day in Europe; we’ve seen better figures out of France (composite rose to 51.7 vs. 50.5 previously) and softer PMIs from Germany (manufacturing PMI weakened slightly from 44.4 to 44.3) – the overall EZ print is due at 9:00am. Euro/Dollar continues its grind lower (in a very low volatility environment), and without the hope of an imminent German rebound combined with continued concerns regarding UK politics, it doesn’t seem like there’s much in the way of the current trend for now.

 

GBP:

Euro/Sterling traded higher for a 13th consecutive day, a record going back to the beginning of the single currency, as the chances of PM May’s Brexit deal passing look remote at best. Last night Andrea Leadsom, the leader of the House of Commons, resigned over PM May’s latest offer. Euro/Sterling has now rallied 4% in since the beginning of May, and with increasing reports that PM May’s tenure is coming to an end, currency volatility is likely to stay high for now.

USD:

The release of the May FOMC minutes overnight did little to move markets; the Dollar’s grind higher continues alongside the move higher treasuries. The Fed minutes were similar to that of recent Fed speak, highlighting patience on monetary policy, waiting for further clarity on the trajectory of inflation and potential downside risks stemming from trade. The day ahead sees PMI releases in the US in the afternoon, while markets also watch US politics as Republicans and Democrats seemingly attempt to overcome hurdles to the passing of the USMCA.

Author: Andrew Burns
Tel: 1800 30 30 03 / +353 (0)1 790 0000
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22 May 2019

9:36 22 May 2019
Morning Dealer Comments

Euro

Yesterday saw a brief period of volatility in Euro/Dollar after Brexit headlines hit the wires (see Sterling piece) but the move higher in Euro/Dollar has been reversed and again inching toward support levels around the 1.11 handle. Today sees another day of very little data released (focus very much on flash PMIs and German IFO tomorrow for signs of a rebound or continuation of the current narrative). In terms of drivers for the day ahead ECB President Draghi and Chief Economist Praet are due on the wires this morning.

Sterling

Another day of Brexit dominated volatility for Sterling. Yesterday afternoon PM May presented her Brexit plan, which offers MPs a vote on holding a second referendum should her Withdrawal Agreement Bill pass in early June. Sterling initially rallied on the headlines but when the dust settled it became evident PM May’s plan was likely to backfire, with the response from the majority of MPs indicating very low probabilities of PM May managing to pass her deal in Parliament.

Dollar

The mood for markets remains nervous after reports the US administration were considering blacklisting up to five Chinese security firms; but ultimately equity markets have been holding in well alongside the Dollar; with the broad Dollar trade weighted Index pushing for historical highs. The day ahead sees the biggest potential mover of the week so far in the form of the Fed minutes this evening, which could be interesting given the dovish pricing by markets (a little more than one full cut priced for year-end).

Author: Andrew Burns
Tel: 1800 30 30 03 / +353 (0)1 790 0000
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20 May 2019

13:19 20 May 2019
Morning Dealer Comments

EURO

No respite for the Euro on Friday after President Trump postponed potential tariffs on European automobiles for six months, with the strong tone in USD/China likely weighing Euro/Dollar. Uncertainty is likely to persist for the week ahead as we move toward European Parliament elections over 23-26 May, and markets remain cautious given the potential broad-based rise of national anti-establishment parties. On the data front flash PMIs on Thursday will take a lot of focus on a relatively light data calendar.

 

GBP

Another tough week for the Pound which once again was the worst performer in G10. Euro/Sterling has now rallied 3% over the last two weeks as hopes of a breakthrough in talks quickly diminished and were in turn, confirmed to be all but over at the end of last week. PM May is still expected to bring ‘something’ to parliament in early June but hopes of getting a deal agreed are very small at this stage. On the data front this week it’s going to be quiet, with retail sales on Friday the main release of note.

USD

Last week saw a broad based rise in the Dollar Index on trade fears and related uncertainty, as Dollar/China pushed to fresh highs for the year. News over the weekend showed little constructive developments from the US/China saga, and as such the DXY will likely remain supported in a somewhat risk averse environment. This week sees the release of the FOMC’s May meeting minutes (Wednesday) and are likely to emphasise patience and data-dependency. Data wise it’s relatively light, with Manufacturing PMI (Thursday).

Author: Andrew Burns
Tel: 1800 30 30 03 / +353 (0)1 790 0000
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10 May 2019

10:03 10 May 2019
Morning Dealers Comments

EU

The single currency showed signs of life yesterday as risk sentiment fell and the Euro was one of the best performing currencies in G10. Euro/Yuan is 3% higher since the start of the month which has dragged the Euro almost 1% higher against other major currencies. Focus for today will be on ECB speaker Hakkarainen while Industrial Production in France came in weaker than expected early this morning and we also see Italian Retail Sales later this morning.

UK

After a strong showing last week, Sterling is bottom of the pile in G10 this week after no news on Brexit negotiations. Labour leader Corbyn is still pushing for the UK government to move their red lines while PM May faces internal challenges from inside her Conservative party. Focus turns to the domestic economy this morning as UK GDP figures for Q1 as well as Industrial Production numbers are released. Euro/Sterling is trading closer to the top of its recent range.

US

Expectations of new tariffs increased throughout yesterday and the news was confirmed overnight; the US have placed a 25% tariff on $200bn of Chinese imports. Stock markets came under pressure yesterday and risk-related currencies sold off. Since the announcement the markets have stabilised as hopes turn to a breakthrough in talks later today. Added to the trade uncertainty, we also get some important US data later today. Euro/Dollar remains close to 1.12 although small signs of volatility are clear.

Expectations of new tariffs increased throughout yesterday and the news was confirmed overnight; the US have placed a 25% tariff on $200bn of Chinese imports. Stock markets came under pressure yesterday and risk-related currencies sold off. Since the announcement the markets have stabilised as hopes turn to a breakthrough in talks later today. Added to the trade uncertainty, we also get some important US data later today. Euro/Dollar remains close to 1.12 although small signs of volatility are clear.

US CPI @ 1:30pm

Author: Ben Murphy
Tel: 1800 30 30 03 / +353 (0)1 790 0000
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