Morning Report: 29 June 2018

June 29, 2018

GBP. Sterling reached a fresh 2018 low against the US dollar yesterday, as markets continue to grind the currency lower across the board. Despite this, the pound has started today’s session on the front foot ahead of the EU summit’s discussions on Brexit progress- or rather, the lack of. With no solution to the Irish border apparent, nor any headway being reported by Irish MPs, and the UK Parliament having struggled with infighting over various elements of Brexit legislation, Brussel’s is reported to have stepped up its provisions should a no-deal Brexit scenario play out. Today at 09:30 Q1’s final reading of GDP will be announced, with no change from the meagre 0.1% prior readings expected.

EUR. The euro struggled to make progress against the dollar yesterday as negotiations over immigration continued into the late night with opposition from Italy’s new Prime Minister. In the early hours of this morning, a new deal was released that would distribute migrants across the EU into holding centres where their refugee status would be decided. Along with this development, processing centres will be set up in Northern African countries in an attempt to cut off migration flows across the Mediterranean. It is unclear yet if this meets the demands of Germany’s Interior Minister Horst Seehofer, who cast doubts over Angela Merkel’s tentative coalition due to concerns over the migration of refugees into Germany once they have been registered in neighbouring countries. Today, Eurozone-wide Consumer Price Index measure of inflation will be released at 10:00 BST, with a rise to 2.0% expected for June. Given yesterday’s positive inflation readings in both Spain and Italy, despite Germany’s inflation level dipping from 2.2% to 2.1% in June, an incremental increase in the bloc’s composite inflation measure looks likely to occur.

USD. The dollar carved fresh 11-month highs yesterday, as measured by the broad dollar DXY index, which measures the US dollar against a basket of other major currencies. Despite this, the final GDP reading for US first-quarter growth was revised downwards to 2.0% against an initial 2.2% figure, with consumer spending at its weakest level in nearly five years. Economists reacted to the news by warning that US President Donald Trump’s “America First” policies- where the administration looks to implement punitive trade tariffs against its partners and renegotiate trade treaties to ostensibly favour the US- are casting a further cloud over the economy’s future growth prospects. While market concerns grow regarding the relationship between the US and its traditional trade partners, a meeting was announced yesterday between Trump and Russian President Vladimir Putin for July 16. Today at 13:30 BST, the Personal Consumption Expenditure measure of Inflation will be released with arise in the headline figure expected due to higher oil prices.

CAD. The loonie topped the G10 currency board yesterday as oil prices rose yet again. Further uncertainty over future oil supply caused WTI and Brent to rally. WTI reached 3 ½ year highs following the largest fall in US stockpiles in almost 2 years and US sanctions on Iranian oil exports. Today at 15:30 BST the Bank of Canada releases its Business Outlook and Future Outlook surveys.

UK news

  • Financial Times: EU leaders strike deal on migrants EU leaders struck a deal to send migrants rescued at sea to centres across the bloc as a more ambitious plan put forward by France and Italy was pared back following lengthy talks.
  • Bloomberg: May Hits EU With Terror Warning as Brexit Mood Gets Bitter U.K. Prime Minister Theresa May accused the European Union of putting the safety of its 500 million citizens at risk by blocking a broad Brexit deal on security, as the atmosphere surrounding negotiations soured.
  • Reuters: Mood darkens for UK consumers, businesses ahead of Brexit British consumers and businesses became more pessimistic about the economy’s prospects in June, according to surveys on Friday that suggested Brexit worries and global trade spats may be taking their toll.

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