The Euro trades back below 1.10 vs. the Dollar, with a story from Politico not helping the Single Currency yesterday. In the Politico piece, four EU officials allegedly stated that the World Trade Organisation has ruled in favour of the US in the long standing trade dispute between Airbus and Boeing, paving the way for US tariffs on European products in retaliation. For today we get ZEW survey data, but geopolitics and broader funding issues (see US section) will be the driver for now.
Data: ZEW Survey Expectations @ 10:00am.
Sterling’s recent move higher has stalled somewhat as the market waits for more concrete progress between the EU and the UK. The day ahead will see the Supreme Court hear two appeals on whether PM Johnson acted lawfully in his suspension of Parliament. Cable retraced hastily from the 1.25 level, with PM Johnson’s trip to Luxembourg yesterday not appearing very fruitful. Politics and headlines will continue to dominate Sterling for now.
Data: No data of note today.
The Dollar trades strongly as markets await the Federal Reserve meeting tomorrow. Increased focus has turned toward Dollar liquidity more generally, given a big move in overnight repo rates as tax day, UST supply and additions to the US Treasury General Account adversely affect USD funding markets (naturally an area of concern for the Fed). For today, funding markets and geopolitics will be the driving force for markets.
Data: Industrial Production @ 2:15pm.
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16 Sep 2019
It was a volatile week for the Euro, finishing the week marginally higher vs. the Dollar despite the dovish ECB. Last week the ECB announced a series of measures aimed to tackle the ongoing slowdown, with the Deposit Rate being cut by 10bp to -0.50%, while QE will be restarted in November at a monthly pace of €20bn per month. President Draghi mentioned that QE limits were not discussed, and made loud calls for fiscal spending, which caused a sharp reversal in the Euro. This week we get a number of ECB speakers on the wires for further colour on the ECB’s thought process, while Germany are expected to release details of a climate package on Friday.
Data: No data of note today.
Sterling was the standout winner in G10 last week with EUR/GBP now trading below 89p and Cable consolidating above 1.24. Last week saw reports that UK PM Johnson may pursue a deal with a NI-only backstop, and despite denials from both Downing Street and the DUP, currency markets have begun to price in the chances of a deal in recent sessions. Last week’s UK employment data was relatively good while the focus this week will be on two main events; a Tuesday court ruling on the proroguing of parliament and the Bank of England who are due on Thursday.
Data: No data of note today.
The Dollar Index continues to consolidate around the 98 handle as the market tackles multiple themes. Despite the more positive commentary from President Trump last week stating he was open to an interim trade deal with China (although would prefer a lasting deal), this week the market opens on more tense footing following the drone strikes in Saudi Arabia. Last week core inflation came in strong, while retail sales was also a solid print, making all the more interesting the upcoming Federal Reserve meeting on Wednesday (who are expected to cut by 25bps from 2-2.25, to 1.75-2%).
Data: Empire Manufacturing @ 1:30pm.
11 Sep 2019
Morning Comment 11.09.19
Euro/Dollar remains stuck in a range between 1.10 and 1.11 ahead of the ECB tomorrow. Yesterday saw more noise from “ECB sources”; indicating an announcement on QE could be potentially delayed, although the Single Currency barely reacted to the story. For the day ahead it’s looks likely to be relatively quiet, with just Spanish industrial production due to be released.
No data of note today.
Sterling volatility is calming down with EUR/GBP consolidating around 0.8950, as UK PM Johnson continues his attempt to find alternative methods to deliver on his promise to leave the EU in 50 days time. Employment data in the UK yesterday was positive, with earnings growth reaching fresh cycle highs at 4%, albeit headlines and Brexit developments well and truly in the driving seat for now.
No data of note today.
The Dollar is broadly unchanged despite the more positive soundbites from China’s Global Times overnight – who indicated that the Chinese were willing to purchase additional US agricultural products. The market remains very skeptical of any positive developments as long as fundamental differences between both sides remain. For today we get second tier data in the form of PPI and wholesale inventories this afternoon.
PPI @ 1:30pm, Wholesale Inventories @ 3:00pm.
3 Sep 2019
Morning Dealer Comments
The Euro remains under pressure against most currencies – with the exception of Sterling – as a weakening economy, concerns regarding potential future U.S. tariffs and ongoing political uncertainty in Italy weigh on the currency. Euro/Dollar is trading below 1.10, to levels not seen since early 2017. Market expectations around the upcoming ECB meeting remain key and so the single currency remains vulnerable in the interim to both economic data releases and ECB speaker headline risk.
Sterling remains under pressure with the uncertain political backdrop. Parliament returns today with the opposition expected to announce legislation intending to prevent a “no deal” exit, at 6.30pm this evening. PM Johnson has announced he will attempt to call an election with the support of two thirds of the House of Commons should this legislation succeed. Economic data releases are likely to take a back seat as Brexit events play out; today sees the forward-looking PMI’s in Construction following yesterday’s weaker Manufacturing numbers.
UK Construction PMI @ 9:30am
Labour Day in the U.S. meant US markets were relatively quiet however the Dollar did maintain its bid tone and rallied to levels last seen in 2017. Risk assets have remained broadly positive globally, despite the very thin liquidity from an absent U.S. market and little forward progress on the trade front. Today could see some headline risk on the recent implementation of tariffs while we also get some important US data later this afternoon.
Manufacturing PMI @ 14.45
ISM Manufacturing @ 15.00
Construction spending @ 15.00
2 Sep 2019
Morning Dealer Comment
The Euro starts off the week below 1.10 following some heavy selling on Friday into month end. The main event for today will be this morning’s Manufacturing PMI’s, finishing with the Eurozone figure at 9am. These numbers will be watched closely ahead of next week’s ECB meeting given the focus on the slowdown in the manufacturing sector in recent months while the end of the week see’s the release of EZ GDP. Last week ECB speakers talked down expectations for stimulus, Coeure and Lane are on the wires this week.
Sterling closed last week at its highest levels against the Euro in over a month ahead of the crucial events this week. The House of Commons returns tomorrow as the UK Government continue to show few signs of softening their Brexit stance. MP’s may look to pass legislation to prevent a No Deal however Brexit Minister Michael Gove, when asked if the government would abide by any bill passed, stated that he would have to see the legislation first. Today see’s UK Manufacturing PMI’s released in the morning.
The latest round of US tariffs on Chinese imports commenced on Sunday as 15% tariffs on $115bn were introduced, China have also implemented retaliatory tariffs of 5% on US crude imports. Despite some hopes that new tariffs may be postponed in favour of talks, risk markets have been stable as President Trump noted that talks are still planned for mid-September. Today is US Bank Holiday so the afternoon is likely to be quiet, the main data releases this week are ISM Manufacturing tomorrow and Non-Farm Payrolls on Friday.