Daily Update - 12th July 2017
Sterling has turned lower after a speech by Bank of England Deputy Governor Ben Broadbent. Of late, sterling had found support on rhetoric from Bank of England (BoE) policymakers have hinted at a possible rate rise. Mr. Broadbent did not mention monetary policy in his speech to the Scottish Council for Development and Industry, in Aberdeen, but was cautious on Brexit’s impact on trade. Mr. Broadbent said “a significant curtailment of trade with Europe would force the U.K to shift away from producing the things it’s been relatively good at.” The market is paring back its bets on a rate hike actually happening at all this year. Meanwhile, the Euro has rallied sharply higher against the U.S Dollar after comments from a Fed member Lael Brainard about “moving cautiously on further increases” due to low inflation. It was seen as a factor triggering the decline in the greenback. Out of reports coming from UK June claimant count, May unemployment rate and wage growth figures out of the UK, Fed Chair Yellen’s semi-annual monetary policy testimony will be the main event today, but given the Humphrey-Hawkins Testimony is very much a repeat of the latest FOMC minutes, and given the heightened US political risk, the market is more focused on political headline risk in early APAC. Nonetheless, the market expects Yellen to frame the commencement of balance sheet normalizing around a comparatively upbeat economic assessment, but even this tone is unlikely to shift the current dollar tide. Later today, the Bank of Canada (BoC) will release its rate statement The Canadian central bank joined the hawkish chorus in June taking the market by surprise and quickly pricing in a rate hike after repeated comments from senior BoC policy makers. Yesterday’s Focus
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