MAIN EVENTS THIS WEEK
Monday: GE IFO, US Home Sales, US National Security Adviser John Bolton visits UK & IT before travelling to Russia
Tuesday: US Consumer Confidence, API Inventories
Wednesday: US Durable Goods, Goods Trade Balance, Pending Homes Sales, DoE Inventories, BoE’s Carney, BoC’s Poloz
Thursday: GE Retail Sales, US GDP, Weekly Jobless Claims, EU Leaders Summit, ENG vs BEL 7pm!
Friday: JP Industrial Production, GE Unemployment Change, UK GDP, EU CPI, US Core PCE, Chicago PMI, Michigan Sentiment, CA GDP, ECB’s Draghi, EU Leaders meeting on Brexit
NB: No date – US Secretary of State Pompeo may visit North Korea & Defence Secretary Mattis expected in China and South Korea.
Another interesting week for the scheduled calendar with a mix of economic data, key speeches and the on-going trade war. Not only this England, kick-off against Belgium on Thursday at 7pm to decide the fate of who tops Group G heading into the all-important knock-out stages. If England finish top of the Group, then they will face the runners-up in Group H (potentially Senegal). If they finish second, they will play the winners of Group H (potentially Japan), but that could mean they go on to face Brazil or Germany in the quarter-finals as opposed to Mexico or Serbia. So, before we cry “it’s coming home” and present a golden boot to “Sir” Harry Kane, we’ve got a little further to go just yet!
Back to markets, where market movement thus far today has been relatively tame but with a pinch of negativity mainly emanating from the fact the US Administration still has its foot on the trade war pedal. According to Bloomberg, the US Treasury is expected to release fresh rules on Chinese investment in technology companies in its latest move to up the pressure on China. This comes ahead of the $34bln tariffs due to be imposed on Chinese imports from next Friday (6th July).
Irrespective of this new threat from Trump, China and the EU remain measured in their response thus far vowing collectively to oppose trade protectionism and unilateralism. How long this even-handed approach lasts may well define the broader market direction for this week.
Oil steadies after Friday’s surge higher…
WTI crude remains elevated this morning and briefly threatened the high seen just before the electronic close on Friday. The move comes in the wake of OPEC and non-OPEC nations adjusting individual production quotas to pump more crude under their plan to add 1mbpd of supply. In terms of the timeline ahead, the Joint Ministerial Monitoring Committee (JMMA) is meeting in Algiers on September 22-23 ahead of the next official OPEC meeting on December 3rd back in Vienna.
Clarity as to the Bank of England’s hawkish intention…
Last week saw the Bank of England vote 6-3 to keep interest rates on hold at 0.5%, a surprisingly hawkish composition given the fact consensus was for 7-2. In addition to this, the Bank also performed a subtler policy change by updating the guidance on then they will consider reducing the stock of debt purchased as part of their QE programme. The question now is where next? On this point I think there are a few potential points of interest. Firstly, there are several speakers from the BoE throughout the 1H of the week (Haldane, McCafferty, Carney). The highlight of these may well be the new hawk, Andy Haldane, who is set to deliver a town hall speech in Wales on Monday/Tuesday.
Nothing seen as yet from the Bank’s chief economist, but his comments could be telling as to whether the markets interpreted his switch last week in the way it was intended.
Back to Brexit, and Thursday and Friday see the EU Summit commence in Brussels with the last trading day of the week a designated day to discuss the current progression (or lack of!) of Brexit. My belief here is that although this meeting of European ministers will no doubt be meaningful, the reality is there is little to discuss, with Theresa May allocating most attention to simply keeping her own house in order rather than pushing forward the details of the negotiation and the sticking point of the Customs Union. I would expect more firm words from our European foes as they leverage the still fragile leadership of the existing Tory government but if you’re looking for sharp market reactions in the GBP you may be disappointed.
EUR to take a back-seat with USD in focus…
Following the dramatic sell-off in the EUR post the most recent ECB decision and press conference the EUR/USD pair has slowly clawed back loses with recent lows becoming shallower as last week developed. This brings us back towards an interesting cross section in the trend lines over recent weeks with the 1.18550 area looking like a strong level of resistance on the upside and an obvious target should we look to push higher once again. European economic data is relatively light this week so given global sentiment is still being predominately driven by the trade-war narrative I would remain sensitive to USD movement as the underlying driver of the pair.
If you missed the market briefing this morning your take watch a recording from this morning HERE.