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Central Banks in focus today

27th June 2017 Market Update

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?? GBP – The pound found a little support yesterday after it was announced that Theresa May had finally made an agreement with the DUP. The DUP will not formally enter the government, but has committed to support the government on its legislative agenda, Brexit and the budget. In return, May will provide Northern Ireland with an additional £1bn over the next two years. In addition, mortgage approvals ticked up slightly.

Today, the Bank of England will release its Financial Stability Report followed by an accompanying statement from Governor Mark Carney. Markets will be watching for any signs that the emergency liquidity provision given to banks last year, following the referendum, may be clawed back. In addition to concerns raised about the current level of consumer debt. As such, we may see some volatility for the pound this morning.

?? EUR – German business sentiment data beat expectations yesterday morning, ahead of the ECB President’s comments later in the day. Mario Draghi spoke to students in a university in Lisbon defending the ECB’s monetary policy, stating that super low rates create jobs, foster growth and benefits borrowers. Hence indicating that the ECB aren’t looking to reduce their current monetary stimulus, thus pressuring the euro.

Today, Mario Draghi will be speaking again along with two other ECB board members at the Forum on Central Banking in Portugal. Markets will watch for any further indications of how the ECB will progress its current policies.

?? USD – Durable goods orders missed expectations and fell further into the red, fuelling doubts about the state of the US economy and the Fed’s aggressive rate outlook.

Markets will look to comments from the Fed Chair, Janet Yellen who will be speaking at an event in London today. Analysts expect Yellen to remain positive and to continue to tow the same line on rate hikes, though she would need to look to explain the stance given the recent batch of weak US data.

 

Key Announcements

?? EUR
09:00am – ECB President Draghi Speech

?? GBP
10:30am – Financial Stability Report
11:00am – BoE’s Governor Carney Speech

?? USD
6:00pm – Fed’s Chair Yellen Speech

 

Our View: We may see volatility in the pound this morning if the Bank of England signal any plans to remove or reduce the emergency liquidity provision.

 

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Darren Kilner

Darren Kilner

Darren is Head of Dealing at FairFX. Darren lives and breaths FX, his Mastermind topics are G8 currencies and economic forecasts.

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