As the World Cup officially draws to a close, it's time to fill that football void with a healthy dose of our Monday market commentary - freshly prepared and curated for you by the Currency UK team. Read on, and let's make this week a great one!
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EXCHANGE RATES //
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CURRENCY CATCH-UP //
Friday started with the Pound under pressure following President Trump’s negative comments adding to Brexit comments. Bank of England Deputy Governor Jon Cunliffe blamed poor weather for weak first-quarter activity and added that the economy is expanding around or a little above its potential growth rate. Cunliffe also expressed some caution surrounding the rate of wages growth and wanted a little more evidence that the supply side is evolving as expected. Although Cunliffe is known to be dovish, Tuesday’s inflation and wages data could be decisive for several MPC votes.
President Trump hinted at trade talks with the UK, which helped underpin sentiment, and short covering helped Sterling to rally back above 1.3200 against the Dollar. CFTC data recorded a 10-month high in bets that sterling would fall, maintaining the potential for short covering if sentiment shifts.
Data from Visa recorded that real consumer spending increased 0.7% in the year to June. The Pound opens at 1.3250 against the Dollar and the Euro around 1.1330.
The Euro remained under pressure ahead of Friday’s New York open and dipped to lows just above 1.1610 against the Dollar as strong US headway against Sterling spilled over into a wider US advance against European currencies.
The Euro was down 0.3%, losing for the fourth day in a row due to a lack of meaningful data out of the Eurozone and speculative positions. The European Central Bank (ECB) has pretty much set all expectations, signalling no change in current monetary stance until at least next summer.
The Euro should also be resilient given the decline in Euro long positions to the lowest level since May 2017. Narrow ranges prevailed on Monday with the Dollar unable to make fresh headway ahead of domestic retail sales data later in the session, while the Euro crept to just above the 1.1700 level.
The July US University of Michigan flash consumer confidence index declined slightly to 97.1, slightly below forecasts. The one-year inflation expectations held steady at 2.9% with a dip in the 5-year expectations index having little impact on Fed policy expectations.
The Dollar lost some traction during the New York session, especially with an element of position adjustment into the weekend and the Euro recovered to the 1.1680 area after finding support above the important 1.1600 area.
According to the latest CFTC data, long speculative Dollar positions increased to the highest level since March 2017, which will maintain the risk of a Dollar correction if there is a shift in expectations.
13:30 USD Retail Sales ex Autos (MoM) (Jun) 13:30 USD Retail Sales (MoM) (Jun) 13:30 USD Retail Sales control group (Jun)