MORNING ROLL CALL

Jun 21 • Morning Roll Call • 1245 Views • Comments Off on MORNING ROLL CALL

Sterling falls on Bank of England governor’s comments, oil slips into technical bear market, dollar hits three week high

The U.K. took a break from Brexit negotiations on Tuesday and after the embarrassing battering the ‘Brexit minister’ David Davis received on Monday, the rest must have come as quite a relief, for him.

Focus moved to the UK’s chancellor Hammond and the BoE governor Carney, who held court at a destination and event called the Mansion House Speech in London. The event is normally held during an evening in the Mansion House location in the heart of The City of London and is an opportunity for mainly men only from the City of London’s investment banking fraternity, to celebrate their largesse. However, after the Grenfell tower disaster last week, the event was cancelled and replaced by Tuesday morning’s far more sombre gathering.

Both leading political figures wasted no time in delivering thinly disguised code that Brexit would be a disaster for the UK, Carney insisting that; due to the weakness of the UK’s economy, interest rates would be held at 0.25% for some time. As a consequence sterling sold off sharply versus its major peers, continuing its fall of yesterday. GBP/USD slumped by close on 1% to 1.2627, having at one point slumped to reach S2. EUR/GBP rose to close the day out at for a 88.12, having reached a high of 88.35 and pushed through R2 mid afternoon London time. A similar pattern of sterling losses was repeated versus all its peers.

Whilst Brexit jitters are effecting European investor sentiment, disappointing Eurozone data also impacted on European markets on Tuesday; the current account balance for April came in at €21.5b, missing the forecast and significantly down on the figure of €46.4b registered in March. Germany’s producer prices also fell marginally. The UK’s FTSE closed down 0.68%, STOXX 50 closed down 0.53%, DAX down 0.58% and the CAC down 0.32%. EUR/USD fell by circa 0.2% on the day to 1.1132, the euro experienced a mixed day versus its peers, making gains versus sterling only.

The dollar reached a three week high versus its major peers on Tuesday, as comments from the U.S. Federal Reserve improved the outlook that it’ll keep raising interest rates. The Dollar Spot Index rose by circa 0.3% after a 0.4% rise on Monday. The measure reached the lowest level since October 2016 last week, USD/JPY fell by 0.1% to 111.44, after the currency pair advanced by 0.6% on Monday.

WTI (West Texas) oil has now fallen by more than 20% from its highest close this year, now entering the definition of a technical bear market. The commodity shed more than 2% on Tuesday, closing the day out at circa $43.41 a barrel, the lowest level witnessed since August. Gold was flat at $1,245 per ounce, arresting an 8 trading day out of 9 series of falls, after closing Monday at the lowest level seen in over a month.

USA equities slipped sharply after certain indices reached record highs on Monday; DJIA closed down 0.29%, SPX down 0.67% and NASDAQ down 0.82%, with tech stocks giving back much of yesterday’s gains.

Economic calendar events for June 21st, all times quoted are London GMT time

08:30, currency impacted. GBP Central Government NCR (May). Investors will be monitoring the government borrowing data for any signs of Brexit weakness, the April figure was -15.2b.

08:30, currency impacted GBP. Public Sector Net Borrowing (Pounds) (May). The forecast is for a reduction to 7.2b, from 9.6b in April.

14:00, currency impacted USD. Existing Home Sales (MoM) (May). Home sales in the USA are predicted to improve to -0.4%, from the significant fall of -2.3% registered in April.

14:30, currency impacted USD DOE Cushing OK Crude Inventory (16 Jun). Oil stockpiles are a highly topical subject currently given the bear market conditions, last week’s reading was a fall of -1156k.

21:00, currency impacted NZD. Reserve Bank of New Zealand Rate Decision (22 Jun). There is little expectation amongst the economists polled, for a rise in the interest rate above the current rate of 1.75%.

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