4th June 2019 Market Update
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🇬🇧 GBP – Reports surfaced on Reuters yesterday that short positions on the Pound are at their highest since March 17th which signals that the recent rout on the Pound will continue for some time to come. This is simply a reflection of uncertainty surrounding the outlook for the economy which has been compounded by the 13 Conservative leader candidates struggling to differentiate their Brexit deal visions. Adding to Sterling’s problems was the manufacturing sector data for May which posted the sharpest downturn in almost 3 years and into contractionary territory. New orders have fallen dramatically following the initial boost provided by stockpiling at the beginning of the year. The Pound fell to fresh 5-month lows.
The UK could face a carbon copy day today with the turn of construction sector figures. Previously they were hovering just above the break-even level and a drop into contraction would cause serious concerns about the health of the UK economy. The Pound will likely struggle as a result.
🇪🇺 EUR – The Eurozone manufacturing figures were also poor but were at a similar level to previous readings. Perhaps surprisingly, the Euro was able to gain significant ground against both the Pound and US Dollar, moving almost a cent against the Greenback and was the winner for the day.
Today is a bigger day for Eurozone economic data. The unemployment rate will be released at 10am which is due to remain stagnant at 7.7% but it could be the inflation readings which are published at the same time that could catch market attention. The May figures are expected to drop from 1.7% to 1.3% and could cause the Euro to fall as it forces the ECB ever further away from an interest rate hike.
🇺🇸 USD – Trump’s first day of his state visit passed without controversy but analysts will be watching for any interventions in the Brexit process. Back on the other side of the Atlantic, both measures of the Manufacturing Sector disappointed compared to previous readings but did stay in growth. This represented the slowest growth in more than two years. The Greenback had a choppy day against the Pound but lost ground compared to the Euro. Bullard spoke in the evening and grabbed the headlines by saying that an interest rate cut “may be warranted soon” as a result of rising economic risk from global trade tensions and struggling US inflation. This caused the US Dollar to fall further.
Today is a bit quieter for the US in terms of data. Factory Orders will be released at 3 but it is unlikely to shake the market up significantly. After Bullard’s comments yesterday, Fed Chair Powell’s speech this afternoon takes on a new significance as analysts will be watching closely to see if he provides further indications that the Fed are considering a rate cut.
GBP: Remains under pressure from political risk and a weakening economy
EUR: Poor inflation readings expected for the Eurozone today
USD: Greenback suffers as chance of interest rate cut increases
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