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AFEX Market Watch 26th July 2016
Tuesday Jul 26th 09:30 GBP BBA Mortgage approvals 15:00 USD Conference Board Consumer Confidence
Sterling
The market was pushing sterling higher on short covering before the CBI industrial order expectations figures which came in at -4 and not as bad as the -6 expected. It managed to hold on to small gains but fell back overnight. Scotland’s First Minister Nicola Sturgeon explained yesterday that a Scottish referendum was still a possibility as Scotland had voted to remain in the EU and she wants to continue free movement of labour from the EU, have single market access and also retain access to funding for its farms and universities from the EU. UK PM May has said she is leader of the “conservative and unionist party” so it will be interesting to see how she manages Scotland’s desires with Brexit. For today we have BBA mortgage approvals data for June released at 09:30 a.m.
Euro
Although the EUR didn’t move very much it was interesting to hear Weidmann of the ECB and Bundesbank comment that there weren’t any signs as yet of Brexit having an economic impact on Europe. G20 commented that it would use all policy tools to lift growth as Brexit weighs (on sentiment) and the German IFO business climate index pushed slightly higher than the expected 107.7 to 108.3. Credit agency Standard & Poors have commented that Brexit is a “wake up call” for an “unsustainable” EU as there are too many moving parts in the electoral politics of 28 nation states and too many conceivable random like events that could push political and economic developments in one direction or another, with impossible to predict consequences and timelines. We have already had one EU crisis this year in the form of Brexit and it seems like we are building up for another one in October in Italy, a country which has youth unemployment of 37%.
Dollar
Was generally firm across the board, gaining ground against the yen on the back of BOJ weakening expectations whilst sterling was sold on Brexit concerns. Overnight, rumours were rife that the BOJ would announce a stimulus package later this week of JPY 6 trillion. This would be very disappointing as the market had considered stimulus of at least JPY 10 trillion and so the market bought JPY and sold USD overnight. On the US political scene the surprising news emerged that President Obama’s half-brother will be voting for Trump and also that the Democratic National Committee Chair resigned after a leak of internal emails showed that officials who were supposed to “always remain impartial in the presidential nominating process” had actively favoured Hillary Clinton during the presidential primary and plotted against Bernie Sanders. This has caused anger, both in the democratic party and US electorate. Trump is campaigning on a ticket for change and Clinton is campaigning for the status quo, the result will probably depend on how angry the US electorate are with their current situation.
Commonwealth et al
With the oil price soft the USD managed to gain against the CAD and AUD. Overnight, both the AUD and NZD squeezed higher on short covering but the important data for the AUD will be CPI released tomorrow.