11th June 2019 Market Update
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?? GBP – Sterling started the week poorly yesterday morning after a batch of data showed a rapid slowdown for the UK economy in April. Analysts may have anticipated disappointing figures after the PMI sector data fell below predictions last week, but few would have imagined the scale of the fall seen yesterday. Manufacturing and Industrial fell into negative territory but the headline reading was GDP for April dropping to -0.4%. This raises the possibility of negative growth for the quarter and the initial stage for entering recession. This put the Pound on a path towards its biggest daily slide in a month. Bank of England Policymaker Saunders indicated last night that interest rates will need to raise interest rates sooner than current market expectations. The market ignored his comments as Saunders is already considered to be one of the most hawkish on the Committee.
The Pound will remain under pressure today as the first official day of the Conservative Party leadership contest gets under way. Boris Johnson has upped the ante with Brussels recently and markets will favour the selling of Sterling the short term while he remains as favourite. Today is another important one for the UK economy with Average Earnings released at 09:30. Expectations are for a slight increase which may help the Pound to recover from recent losses.
?? EUR – With Bank Holidays in some major European nations, it was a quiet day for the single currency. The Euro initially dipped as markets opened following two ECB sources saying on Sunday that a rate cut was a policy option if the Eurozone remains stagnant. No major data was released during the day, but this seemed to favour the Euro which was able to gain ground against both the Pound and US Dollar.
Today is again a sparse day for data in the economic calendar. Only Investor Confidence is released which is unlikely to be watched closely by markets.
?? USD – The US Dollar gained on Monday against a basket of currencies as a result of the US and Mexico agreeing a deal on immigration which will avoid the implementation of tariffs, for now at least. Job Openings data released at 3 suggests that the demand for labour remains strong but that hiring slowed significantly in May with many pointing fingers at concerns of Trumps’ trade war on dual flanks starting to impact hiring. The discussions are not significant in isolation but will affect rates when factored into interest rate expectations in coming months.
Today features Producer Price Index figures for the US at 13:30 but these are unlikely to shake up the market. Expect a quieter day for the Greenback.
GBP: Sterling struggling with economic and political risks
EUR: Single currency looking for direction
USD: Trade wars dominating market appetite for Dollars
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