27th July 2018 Market Update
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?? GBP – Despite a lack of data from the UK, Sterling was under political pressure as Barnier stressed his concerns over the government’s plan to keep the UK temporarily inside the UK’s regulatory area for goods – to avoid a hard border in Northern Ireland in the case of no deal. Today there is no data of note from the UK.
?? EUR – Mario Draghi kept interest rates on hold yesterday as expected and maintained his stance on quantitative easing being reduced in September and then wrapped up in late December. He was upbeat about the eurozone, however this had minimal impact on the euro.
?? USD – Core durable goods orders came in slightly below expectations at 0.4%, however this had minimal impact on the US dollar. Today the dollar is in the spotlight, as advanced GDP is being released from the US and expected to come in at around 4.2%, significantly ahead of the governments growth targets. If this does break the market expectations, you could expect further dollar strength.
13:30pm: Advance GDP q/q; Advance GDP Price Index q/q
Summary: As expected, yesterday Mario Draghi kept interest rates on hold and stuck to his guns when it comes to QE. He plans to wrap the programme up in late December, and despite concerns over the European economy Draghi remained upbeat. The euro did not move much in response to the announcement. In the afternoon US core durable goods data came out just below expectations, but again the dollar did not move much in response.
Yesterday Michel Barnier stressed his concerns over the government’s plan to keep the UK temporarily inside the EU’s regulatory area for goods. The fact that Barnier did not want to entertain May’s backstop proposal undermined her government and the meeting which took place between the Cabinet at Chequers. Further pressure was applied to May, as Barnier stated that May should not bother to approach other European capitals. He went on to state “Anyone who wants to find a sliver of difference between my mandate and the leaders are wasting their time.”
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