10th July 2018 Market Update
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?? GBP – Markets initially shrugged off the resignation of David Davis as Brexit Secretary with the pound up nearly 0.5% against the US dollar at the top end of the day, as investors speculated a “soft” Brexit now seemed more likely. Former Housing Minister Dominic Raab has now replaced David Davis.
However, during the afternoon session, Sterling’s gains proved to be short lived as the currency tumbled following the shock resignation of Boris Johnson as Foreign Secretary, with investors now wondering whether Mr Johnson will now challenge Mrs May for the PM role. As we have seen before, any political uncertainty will cause the pound to decline which is what we’re seeing at present.
We did see Sterling stage a recovery in the evening and finished the day 0.3% lower against the US dollar and euro. Sterling is attempting a bounce back today ahead of manufacturing and industrial production figures at 9.30am and the monthly GDP estimate from the Office for National Statistics expected to come in higher at 0.3%.
?? EUR – Mario Draghi, in his speech to the European parliament, warned that the main risks to economic growth will come from trade disputes. With regards to monetary policy, he reiterated that the ECB would reduce QE from €30bn to €15bn and end the programme at the end of December as well as stating that interest rates will stay on hold for at least another year. There was no move on the back of the speech given that Draghi didn’t add anything new.
No major data announcements today.
?? USD – The dollar continued to gain following on from Friday’s well received job figures but other than that there was no data to move the dollar market.
No data out today either so we could see little action on the dollar.
09:30am: Industrial and manufacturing production – Expected higher at 2.7% and 2% respectively
09:30am: GDP Estimate for May – 0.3%
Summary: An eventful day in the markets yesterday following David Davis’ resignation as Brexit Secretary on Sunday and then Boris Johnson’s resignation yesterday afternoon as Foreign Secretary.
Sterling toppled by the end of the day as markets are turning their attention to the chances of a vote in no confidence for Theresa May.
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