Busy week for $ and GBP
GBP: A gradual slide doesn’t look like stopping soon. Today may see volatility as Grieve proposes an amendment to avert a No-Deal Brexit – we have to wait for the House Speaker to tell us whether this amendment will be heard today – which is why GBP hasn’t budged yet this morning – GBP/EUR lingering with intent around 1.1140
UK data has been poor – services industry is stagnant, manufacturing actually contracted, and a VERY strong reading is needed in June’s official growth data in order for the UK to print a positive growth rate in Q2 of 2019.
All rather dismal .. a few months ago, we saw calls for interest rate HIKES after Brexit – perhaps those will also be re-assessed now!
EUR: Goldman Sachs suggest that due to the extent of weak data across the board in the Eurozone, that the ECB has scope to re-start the Quantitative Easing Program. It will of course be limited due to the ECB having imposed limits on the amounts. I guess another question should be – how effective is this course of action, and are we simply treading water again? Either way, pessimism surrounds the EUR.
USD: A very strong jobs report on Friday saw USD strength return, forcing EUR/USD to the key 1.1200 level and pushing GBP/USD under 1.2600 – both are close to yearly lows. Investors are scaling back expectations of an aggressive rate-cutting cycle in the USA, BUT – everyone will be waiting for tonight’s key comments from Fed Chair Powell in his speech.
Following this evenings speech, we have 2 days of Powell’s Testimony before Congress, and US consumer inflation data on Thursday. It is times like this which bring a real sense of direction to the USD.
AUD: Recent tax cut announcements, and interest rate cuts are considered to be ‘enough’ to revive the economy. This is according to former advisors to the government. Whether this holds true is uncertain, but if this is the feeling at the top level, it suggests that the rate-cutting cycle in Australia will not be prolonged unless external factors pile on the pressure.
AUD/USD has hovered around the key 0.7000 level, but recently pulled back to the 0.6950 level on poor confidence data, & as hopes fade for an end to the US-China trade spat.