Daily Update - 12th June 2018
On Monday, Sterling declined against the Dollar on Monday after British factory output suffered its biggest monthly drop since 2012, underlining that economic momentum remains fragile and will likely need to improve before interest rates are raised. The disappointing data comes ahead this week’s key British parliamentary vote on the EU withdrawal bill. Euro was range-bound against the dollar on Monday as traders turned their attention away from a crisis in Italy and a divisive G7 summit towards a European Central Bank (ECB) policy meeting that could signal the beginning of the end of the bloc's vast economic stimulus. Investors are raising their bets that the ECB will signal on Thursday a winding down of its vast bond-buying programme by the end of this year following a flurry of hawkish comments by officials last week. On Tuesday, Euro-light on the macro calendar, although German ZEW Sentiment Surveys for June are expected to tick lower. Upcoming US CPI figures will be the next headline to watch after the Trump-Kim summit wraps up. Moreover, an above-forecast headline and core CPI reading could embolden hawks at the FED. The USD may also pick up a strong bid if the historic Trump-Kim Summit ends on a positive note.Yesterday’s Focus
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Market optimism ahead of Thursday's ECB meeting was reinforced by assurances from Italy's new coalition government that it does not intend to leave the euro or issue securities to pay off companies owed money by the state. Before the ECB meeting, the U.S. Federal Reserve is expected to raise interest rates for the second time this year on Wednesday. The market's focus will be on the Fed's projection on the path of future interest rates.
