Global Themes

Speeches from Central Bank Heads to dominate markets
  • The Week ahead 
  • Bank bailout agreed in Italy
  • Midyear averages as focus turns to Quarter 3

USD

Monday- Durable goods data from the US, set for release at 2:00 pm, is currently forecasted to show an improvement on previous figures. Current expectation is -0.6% compared to previous -0.8%. Last Friday, US Federal Reserve (FED) members rounded the week off with more ‘dovish’ (preferring to keep interest rates low) comments, which has weighed on the US Dollar. Some members believe that there is no precedent for Federal Reserve Chair Janet Yellen to continue with her current path which hints at further interest rate hikes this year.

US data lately has been below par which supports some of the FED members comments, but if we begin to see a resurgence, sentiment among traders could easily shift.

Tuesday-  FED Chair Janet Yellen is set to speak at 6:00 pm. Mrs Yellen’s recent comments surrounding the US economy and how we can see more interest rate rises have not convinced markets. The US Dollar index remains buoyant around the 97 level. Should she continue with her bullish comments this may prop up the US dollar after last week’s rout.

Thursday -  12:30 pm- US GDP is to be released showing no change on previous figures. As mentioned, US data recently has been below par therefore if GDP does come in weaker, it undermines FED chair Janet Yellen’s comments and could weaken the US Dollar. 

EUR

Monday-  At 5:30 pm European Central Bank (ECB) President Mario Draghi is set to deliver a speech at the ECB Forum in Portugal. When President Draghi speaks, markets watch closely for any hints on the current Quantitative Easing (QE) programme. On this occasion, markets expect nothing different. Should he indicate the ECB is looking to begin reducing the programme sooner rather than later the Euro could strengthen. Mr Draghi will also be speaking on Tuesday and Wednesday this week.

Thursday-  10:00 am The Eurozone releases economic sentiment and business climate. The majority of data is set to show an improvement. The EU has been going from strength to strength which has been reciprocated in markets with the euro holding on to gains. Any further improvements could allow markets to push higher. 

Bank bailout agreed in Italy

Overnight the European Commission approved a €17 billion bailout of the Italian bank Veneto – the markets will be looking out for comments Mr Draghi could make about this over the week as the use of taxpayers funds for bank bailouts is highly controversial.

GBP

Tuesday -  Press conference from Bank of England (BoE) Governor Mark Carney after the release of the report of the biannual FPC meeting at 9.30am. Mr Carney’s comments will be key following the recent BoE split on interest rate rises.

Wednesday – Mark Carney will speak again at ECB forum in Portugal, 2.30pm.

Thursday – A busy day of data releases, we start with UK consumer credit. The data release set for 8:30 am is to show a reduction in the consumer credit as banks have applied tighter credit scoring policies. If less credit is available in the market, spending may overall reduce which could impact on inflation in the longer term. 

Friday - Final GDP q/q in the UK, forecasted at 0.2%

Midyear averages as focus turns to Quarter 3

Since the beginning of the year, Sterling has appreciated against the US Dollar by over 3% but depreciated against the Euro by over 4%.  In Quarter 2 (Q2) Sterling has witnessed approximately a 1.6% rise in GBP/USD from Quarter 1. Importantly, the currency pair still trades 2 cents above the 2017 average rate of circa $1.25. 

This month has witnessed a continued ‘bearish’ trend meaning GBP/EUR was subject to further downside risk through investors selling Sterling in favour of the Euro. Since the beginning of June, the pair is down over 1% and has traded at its lowest level this year in the mid €1.12 region




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