Morning Comment 07.07.2020
It was a positive start to the week for the single currency which closed just above 1.13 against the USD as risk sentiment was broadly positive around the globe. Euro strength is expected to continue however there are some headline risks as EC President Von der Leyen and German Chancellor Merkel meet to discuss their budget ahead of the European Council Summit later in the month. German Industrial Production came in slightly weaker than expected this morning resulting in modest Euro selling.
It was a quiet start to the week in UK markets with the absence of any economic data and summer markets resulting in low volumes and tight ranges for the Pound. Tomorrow’s scheduled meeting between BOE Governor Bailey and lawmakers from the Conservative party has been postponed to a later date as Chancellor Sunak is due to update the House of Commons on his plans to kick-start the economy in the wake of the Coronavirus Pandemic. There is no data due today.
The Dollar traded to its lowest levels in three weeks against a number of currencies yesterday before bouncing back a little overnight. USD/CNH was the standout mover and traded below 7.00 overnight before stabilising. Equity markets in the US started the week on the front foot with the S&P gaining 1.6% while the Nasdaq has hit new record highs. The calendar for today is relatively light with only secondary data due this afternoon while Fed members Bostic and Daly will be on the wires later this evening.Tel: 1800 30 30 03 / +353 (0)1 790 0000
6 Jul 2020
Morning Comment 06.07.20
Last week was a positive one for the single currency which managed to keep upside momentum in tack. Some promising data including German Retail Sales, which jumped almost 14%, and a further rebound in Eurozone PMI numbers helped boost the Euro. Elsewhere the German Bundestag also approved the ECB’s QE Operations, removing another tail risk for the currency. There is limited data due in Europe this week while the focus for today will be on Eurozone Retail Sales due later this morning.
Sterling traded well last week despite hitting new three month lows early on in the week. Bank of England Chief Economist Haldane kept the conversation of negative rates on the table and his warnings of risks remaining to the downside were echoed by the sentiments in a survey of UK manufacturers. Added to this we saw parts of the UK re-entering partial lockdown and UK PM Johnson’s £5bn infrastructure announcement. The focus for this week will be on the restarting of Brexit negotiations.
It was a quiet end to last week with US markets closed on Friday for July the 4th celebrations but global stock markets look to be opening this week on a strong footing with strong gains seen in the overnight Asian session. There doesn’t seem to be any specific news driving the move but for now it seems investors are focusing on the continued pickup in economic data and overlooking rising infection cases in the US. The focus for today will be on the June ISM non-manufacturing data due this afternoon.
2 Jul 2020
Morning Comment 02.07.2020
The single currency has remained under pressure for most of the week, briefly trading below 1.12 for the first time in over two weeks, before settling in a narrow range overnight. Yesterday there was a record take up of over €1.3bn of long-term loans as part of the ECB’s TLTRO stimulus package, largely in line with market expectations, while focus for today will be on European leaders who begin negotiations over the €750bn recovery fund at the EU Summit.
Yesterday the BoE kept the base rate unchanged at 0.1% and increased their QE programme by £100bn while simultaneously reducing their weekly QE purchases. Sterling initially rallied back below 90p following the announcement however quickly reversed course and traded to its lowest levels since the end of last month later in the afternoon. This morning’s Retail Sales numbers were better than expected, giving the Pound a boost to start today.
Continuing concerns over a second wave of infection in parts of Asia and the US have seen the re-emergence of safe haven demand for the Dollar over the past few sessions while worse than expected jobless numbers yesterday cast doubt over the sustainability of the recent stock market rally. There is a light data calendar today but investors will be watching out for comments from three Fed members this afternoon including Fed Chair Powell.
1 Jul 2020
Morning Comment 01.07.20
The Euro was in consolidation mode for much of yesterday afternoon as markets took stock of month end and half year end trading which resulted in a mixed performance for the single currency. German Financial Minister Maas announced an expected agreement on the EU recovery fund in July which should boost sentiment. Earlier this morning German retail sales showed a rebound of 13.9% in May after a decline of 6.5% in the previous month which was the strongest monthly increase since the record began in 1994.
Sterling had its best performance against the Euro in over three weeks as a combination of month end flows and a pickup in risk sentiment boosted the Pound and saw Euro/Sterling fall back below 91p. Yesterday BoE Chief Economist Haldane said the review of negative rates will go on throughout the second half of this year while he indicated that risks remain to the downside and more stimulus may be required. The focus for today will be on the Manufacturing PMI number due at 9:30am.
Month end saw an easing of recent Dollar strength as risk sentiment improved after another positive data surprise in the form of consumer confidence yesterday. Jerome Powell and Steven Mnuchin’s testimony did not cause any market moving headlines although comments from Mnuchin did suggest that July will be a significant month for Phase 4 stimulus prospects. The focus for today will be on manufacturing ISM numbers which are expected to rebound while the minutes from the FOMC’s June meeting will be published later this evening.
30 Jun 2020
Morning Comment 30.06.20
The single currency remains within recent ranges as the market prepares for month end and quarter end which will likely see some short term volatility as hedging flows increase over the course of the day. There were some positive developments yesterday on the recent issue of the German Constitutional court ruling questioning the validity of the ECB’s QE programme while the focus for today will be on inflation numbers this morning and a speech from ECB’s Schnable at noon.
Sterling has been under pressure for the past number of sessions and touched a low of .9170 against the Euro yesterday after resistance at 91p gave way. Concerns persist over the levels of infections as the country emerges from lockdown while earlier this morning revisions to final Q1 GDP figures showed the economy shrank 2.2% from the previous quarter. Later today PM Johnson is due to announce £5bn of spending on infrastructure in “a New Deal” to instil confidence and rebuild the economy.
The Dollar is the strongest currency in G10 at the start of a shortened week in the US that also includes quarter end today. Overnight better than expected Chinese PMI’s boosted risk sentiment however Fed Chair Powell commented that a full economic recovery was unlikely until people feel confident it is safe. Later today will see the release of Chicago PMI and Consumer Confidence before Powell and Treasury Secretary Mnuchin testify before the House Financial Services Committee.