Jun 6 • Morning Roll Call • 2053 Views • 1 Comment on

Sterling rises as bets the Tories will win the UK’s election increase, EUR/USD falls from recent seven month high

Having recently forecast that sterling could reach 1.45 versus the U.S. Dollar by the end of 2018, investment bank Morgan Stanley is now rowing back from that forecast, suggesting that the currency pair GBP/USD will peak at 1.26 next year in Q1 and finally end the year at circa 1.23. They quote the current U.K. government’s intransigence on pursuing a hard Brexit as the cause of their reevaluation. In the same note published on Monday, they also proclaimed support for the euro; predicting EUR/USD would reach 1.19 next year.

The weekly prominent economic calendar news began during Monday’s Asian session, with China’s Caixan PMI readings, for both the services industry and the overall composite in May being published; both readings came in ahead of the previous month’s figure. Thereafter, focus turned to Europe, with Markit PMI data published on: Italy, France and Germany being published. France and Italy missed forecasts, but Germany beat forecasts, coming in at 55.4 for services, last month was 55.2, the composite came in at 57.4, ahead of the forecast of 57.3. The Markit PMI for the Eurozone came in ahead of expectations at 56.3, with the composite coming in right on forecast at 56.8. European markets experienced quite a dislocation on Monday; Germany’s DAX came in up 1.25%, STOXX 50 fell 0.34%, CAC closed down 0.66% and the UK’s FTSE down 0.29%. The euro experienced a sell off versus: the Aussie, Swissie, kiwi, yen and sterling. EUR/USD ended the day down circa 0.2%, at 1.1255.

From the U.K. we received the new car registration data, which fell by a recent record -19.8% last month and this month continued the slump, with a -8.5% fall. This huge reversal could indicate that static wages and higher inflation are beginning to hit consumers. With the UK’s savings at record lows, the U.K. consumer is broadcasting the signals of being all spent up and creaking with too much credit; close on 90% of new cars are sold on credit. The latest Markit PMI missed forecast for the UK’s services; coming in at 53.8. The composite PMI also missed the prediction at 54.4, adding more evidence that Britain’s economy may be on a cliff edge due to many factors, particularly Brexit. GBP/USD ended the day at circa 1.2906, up 0.1%, having reached a daily high of 1.2942, up circa 0.4% at one stage, during the trading sessions, having registered a loss initially in the morning London session.

From the USA both the hard and soft economic calendar data reported during Monday was mixed; the ISM non manufacturing composite came in at 56.9, missing the forecast, Markit’s services PMI also missed the target, registering a reading of 53.6. Factory orders fell by -0.2% last month, whilst durable orders fell by -0.8%, missing the forecast of -0.6%. This is the second month in series that the durable goods figure has missed expectation and registered a negative reading. The main USA equity markets closed down marginally; DJIA down 0.10%, SPX down 0.12% and the NASDAQ down 0.26%. Alphabet, the ‘owners’ of Google, reached the milestone Amazon set recently; a $1,000 price per share. The market capitalisation of GOOG (it’s market ticker symbol) is currently $687.4b, up circa 25% in 2017.

WTI oil slipped by circa 0.7% to $47.14 a barrel, after falling by approx 1.5% on Friday, Monday’s settlement was the lowest closing level for three weeks. Gold ended the day close to $1279 per ounce, up circa 0.2%. The dollar index dropped by approx. 0.2%, whilst USD/JPY rose by circa 0.2%, to end the day at approx. 110.45.

Economic calendar events for June 6th, all times quoted are London GMT time.

04:30, currency impacted AUD. Reserve Bank of Australia Rate Decision (JUN 06). There is little expectation amongst the economists polled, that the RBA will raise the base interest rate above the current level of 1.50%.

08:30, currency impacted EUR. Euro-Zone Sentix Investor Confidence (JUN). The forecast is for this key confidence reading to come in at 27.4, no change.

09:00, currency impacted EUR. Euro-Zone Retail Sales (YoY) (APR). The prediction is for sales growth to fall to 2.1%, from the previous level of 2.3%.

14:00, currency impacted USD. JOLTS Job Openings (APR). Job openings in the USA are forecast at 5738, a slight fall from 5743.

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