Five Left in Tory Leadership Contest

19th June 2019 Market Update

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?? GBP -  So Raab leaves the Tory Party Leadership Contest as the field slims down to five. The next round of voting takes place this afternoon with the result expected at 6pm this evening once more. The pound remains under pressure as the market continues to factor in the high likelihood of a Boris Johnson premiership though in truth Boris’s share of the vote did not rise as much as the market thought it might given the stated backing of former candidates McVey, Hancock and Leadsom.

Focus this morning will fall on UK Inflation for May at 9.30am. The market expects a slight relaxation to 2% (the BOE target) from last month’s 2.1%.

?? EUR - Yesterday’s German ZEW and EU inflation data coupled with the Germain IFO thinktank downgrading Germany’s GDP growth disappointed markets yesterday. ECB President Mario Draghi stated that interest rate cuts and QE could be used to help combat the seemingly worsening EU economic outlook. These comments kept the euro on the backfoot and prompted a comment from President Trump that the EU were manipulating currency rates!

There are several speakers from the Eurozone today from Jean Claude Juncker at 9.30am to ECB council members Lautenschlager (10am), Coeure (1.30pm) and President Draghi (3pm). Analysts will be keen to assess these speakers comments given Draghi’s dovish comments yesterday.

?? USD -  Reports that the US and China are restarting trade talks ahead of the G20 meeting has seen markets breath a cautious sigh of relief with hopes rising that trade tensions could abate. President’s Trump and Xi Jinping will hold an extended meeting at the G20 in Japan to hopefully take matters forward.

Focus this evening will fall on the FED meeting with the market keen to hear the central banks assessment of the current US economic situation as well as their outlook on US interest rates following recent dovish rhetoric from various FOMC members. The announcement will be made at 7pm tonight. No change in interest rates are expected but market are suggesting there is an 85% likelihood of rate cut in July

 

Summary:

GBP: UK Inflation and Round 3 of the Tory party leadership contest in focus today
EUR: Draghi suggests rate cuts and QE to come
USD: All eyes on the Fed for hints of a likelihood of a rate cut


 

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