RedFX: UK data ahead, USD struggling
GBP: UK Retail Sales data is published on Tuesday, and in an economy driven by the service sector and consumption, this will be closely watched. Last month’s rebound was higher than expected, but with the end of furlough in sight, and the initial ‘exuberance’ after lockdown finished, any weakness will hurt GBP.
Also on Tuesday we have CPI (Inflation) data. Annualised, UK inflation sits at 0.6%, and no great change is expected with the inclusion of July’s data – nonetheless, these are key statistics for GBP – GBP/USD higher, benefitting from a weak USD (1.3150) and GBP/EUR at 1.1075
Brexit: In an interview with the Financial Times (FT), the European Commission Executive Vice President Valdis Dombrovskis warned the banks in the city of London that they will have a longer waiting period for market access after Brexit. If the below is true, then the all-important City revenue stream looks set for a huge shock:
“Brussels would not be ready in the coming months to assess whether Britain qualifies for some pan-EU access rights, known as equivalence provisions, because the bloc's own regulations are in flux.”
USD: The rate of infection is starting to decline, but deaths remain high, and the end of government support looms large in the US. All eyes will be on whether lawmakers can agree a further stimulus package – too small, and USD will continue to be weak, above expectations will boost the economy and boost President Trump’s chances of re-election (a double-edged sword for financial markets). With the month-long recess now in place, Pelosi has already requested a return.
EUR/USD around 1.1850 remains elevated, and the USD seems unlikely to quickly regain the 7% lost in 2months.
Wednesday evening sees the publication of the Fed’s minutes from the July meeting, where they expressed a level of concern regarding the extent of the downturn. Publication of the minutes gives us a greater insight into the extent of the concerns.
EUR: Boosted last night by comments from German Finance Minister Scholtz, outlining a €10bn extension to the job subsidy plan, including:
Extending up to 2yrs
Government payment of up to 60% of employee salaries
AUD: a choppy day on Friday, but AUD is benefitting from the ‘vaccine’ announcements and reporting of 0 new cases in the major Chinese provinces which were the previous epicentre of Covid-19.
NZD: Talk of negative rates in New Zealand, and a 1month delay of the general election have pressured NZD. NZD/USD fell to 0.6530 – this trend may continue against the backdrop of a more dovish policy statement by the central bank published last week.