Angus Campbell

US consumer defies geopolitical tension

There were concerns that the consumer confidence figure release today was going to be knocked by the recent build up of geopolitical tensions in Ukraine and the Middle East, but this certainly wasn't the case.  Stock markets and risk assets continue to defy gravity and it looks like the US economy will have rebounded from its shock fall in GDP last month strongly - we will see tomorrow.  With the labour market continuing to improve it's little surprise to see a cheerier US consumer and the ...

Simon Smith

UK GDP in line

Sterling holding relatively steady after latest GDP data recorded 0.8% increase, in line with expectations. Cable 1.6990 after some initial weakness.

Simon Smith

EUR lower on weak IFO reading

The euro has reversed the initial early strength after weaker than expected Ifo data, which showed the headline reading fall to 108.0, from 109.7.  Both expectations and current conditions balances fell. EURUSD is currently down to 1.3450.

Simon Smith

Creeping towards higher rates in the UK?

The latest minutes to the MPC meeting showed a more balanced picture and with the vote remaining at 9-0 for keeping rates on hold, sterling has softened from the levels that were prevailing ahead of the release. Note though that the currency was moving higher early on during the morning session, so perhaps had run away a little in the expectation of something more bullish. The minutes did state that some members saw a reduced risk of a rate rise derailing the recovery. On the other side though, ...

Simon Smith

EUR breaking lower

Having been moribund for the past few session, the euro has broke lower this morning, below 1.35 and through the previous low of the month at 1.3491.  This has happened ahead of the US CPI data due later today. As we pointed out in the daily today, EURUSD is increasingly being driven by US rate expectations as the ECB's hands are seen as being tied by the fact that most policy option have been exhausted. There are no particular catalysts being cited for this latest move, but it is perhaps ...

Simon Smith

Volatility split

We're again witnessing a divergence in volatility between FX and other markets as events in the Ukraine take on a new dimension.  On equities, the VIX (measure of expected future volatility) has spiked to 3 month highs. A similar measure for FX (CVIX from DB) has declined to new lows for the year. Why is FX so sanguine about it all? Three reasons. Firstly, in case you had not noticed, the old "risk on, risk off" dynamics are a thing of the past, having been ditched well over a year ago. ...

Simon Smith

Dollar weakness on Yellen

The dollar has fallen on the initial comments from Fed Chair Yellen during her semi-annual testimony in Washington today.  Her opening statement stressed that slack remained in the labour market and again emphasised that "a high degree  of monetary policy accommodation remains appropriate".  That said, the dollar remains above the levels seen just ahead of the last employment report, by just under 0.4% on the dollar index.

Simon Smith

CAD reversal

The CAD has reversed on the back of weaker employment data. USDCAD has pushed up to 1.0690, 50 pips higher vs. levels ahead of the release. Data showed the unemployment rate rising to 7.1%, with move away from the year lows at 1.0621 made earlier in the month. Over the past 4 weeks, CAD has been one of the stronger performers, helped by higher inflation data released last month.

Simon Smith

GBP knocked lower by production data

Sterling having to deal with some worse than expected production numbers, which showed the headline rate falling 0.7% in May.  The currency had so far managed to outperform the dollar during July, despite the strong run seen in June, so in some ways this correction lower was a long time coming. We are seeing cable around 50 pips lower to 1.7090, EURGBP at 0.7955.

Simon Smith

Euro weaker on Draghi

The single currency has been pushed lower on the back of comments from ECB President Draghi. At his monthly post-meeting press conference, he has stated that economic risks remain to the downside, that rates will be at current level for "extended period" (this has been a pledge for a year now) and also that preparatory work related to ABS purchases continues.   EUR down to 1.3615, but given push lower from stronger US jobs data, the overall impact from Draghi's comments has been small.

Note ...

Simon Smith

Sterling popping higher

Sterling up to 1.7130 after stronger than expected manufacturing PMI data, headline readign up to 57.5, from 57.0. Market was expected small fall.  EURGBP down to 0.7987, so sterling managing to outperform what is an already firm euro.

Simon Smith

Dollar suffering into month end

We mentioned in the daily the risk of some more choppy trading into month-end, which is proving to be the case. Both sterling and the Aussie are fairly buoyant, with cable above the 1.71 level and also the euro up to near 1.37.   It's not wise to attach too much significance to these moves, but it's notable that we are seeing dollar weakness into the end of the half year that had so much hope for dollar strength.

Simon Smith

Bank of England bares teeth

Leaving aside Suarez references for now, the Bank of England has today taken the opportunity to bare its teeth in the new power given to it under the guise of the Financial Policy Committee (FPC). Previously, the Bank monitored financial stability and conditions, but did not have the power to take action. That changed post-financial crisis, with the FPC given macro-prudential tools to tackle perceived financial excesses or potential issues.

The measures announced today are seen as insuring ...

Simon Smith

Sterling waiting for FPC

Sterling just below the 1.70 level on cable ahead of announcement by the Financial Policy Committee.   There is expectation that they will announce some measures to take the heat out of the housing market. Any measures on this front could well curtail further sterling strength on the basis that they will make an interest rate before the year end less likely, but this may not be sustained given that Carney has previously stressed that such measures were not a substitute for higher rates (Mansion ...

Simon Smith

Dollar holding weaker tone post-GDP

The dollar has remained on the backfoot after the weaker US GDP data seen earlier today, with the Q1 reading revised down further to -2.9% on an annualised basis.  Data on durable goods was also weaker.  The numbers did allow cable to touch the 1.70 level again, but profit-taking was seen into the close.  This fits with the price action seen yesterday, which was more prone to profit-taking, even though interest rate markets were not really impacted by Carney's comments earlier in the day. ...

Simon Smith

Dollar steady for now after Fed

No great surprises from the Fed statement and minutes.  Growth forecasts lower, inflation forecast for this year nudged up slightly. No members see rates higher this year, most see move next year and projections have been nudged higher. All pretty much as expected though with dollar  marginally firmer on the news.