Central banks suggest rate rises are coming; sterling and Canada’s dollar rises accordingly, U.S. equities rise with oil
With the U.S. Fed keeping to its commitment to raise interest rates by three times in 2017 (two so far and one due before December 2017), other central banks appear to be singing from the same hymn sheet, in relation to tightening monetary policy. Mario Draghi caused the euro to rally on Tuesday, with suggestions that rates might rise in the Eurozone and asset purchase easing may be reduced (a suggestion that the ECB tried to distance itself from on Wednesday). Whilst Canada’s central bank president Poloz and the UK’s BoE governor Carney, also intimated during Wednesday’s trading sessions, that interest rates may have to rise, sooner rather than later. As a consequence, the Loonie (Canada’s dollar), rose sharply, as did the UK’s pound versus their major peers.
GBP/USD closed the day out up circa 1% at 1.2930, just short of R2, having breached the level earlier in the day, reaching a high of 1.2972. Sterling gained versus the majority of its peers, with the exception of the Loonie. USD/CAD ended the day at circa 1.3031, down over 1.3% on the day, with the currency pair resting on S3. The Canadian dollar also enjoyed a positive New York session versus its peers due to it being a commodity currency, heavily linked to the price of oil, which rose considerably.
WTI advanced by 1.2% to close out at $44.92, reaching the critical handle of $45.00 during the day, after climbing by circa 4% during the previous four sessions. U.S. government data revealed a drop in U.S. gasoline supplies, which have remained high at the beginning of the summer driving season. Gold rose by 0.1% to $1,249 an ounce, climbing for a second day in series.
In terms of European economic calendar news, Germany’s import prices YoY fell back to 4.1%, falling by -1.0% in May, whilst in the UK, house prices, according to the vested interest lender Nationwide, surprisingly rose by 1.1% in May, preventing the annual price falling to a flat rate, YoY house prices in the UK are now apparently up 3.1%. The UK’s FTSE closed down 0.63%, STOXX 50 down 0.07%, DAX down 0.19% and CAC down 0.11%. EUR/USD closed the day out at approx. 1.1377, up circa 0.4%.
From the USA mortgage applications fell by -6.2% according to last week’s report, pending home sales fell by -0.8% in May, the trade goods balance deficit improved marginally, to -$65.9b. The USA equity markets rallied on Wednesday; DJIA up 0.69%, SPX up 0.88% and NASDAQ up 1.43%, tech stocks enjoying a boost. USD/JPY closed the day out at circa 112.27, up 0.1% on the day.
Economic calendar events for June 29th, all times quoted are London GMT time
06:00, currency impacted EUR. German GfK Consumer Confidence Survey (JUL). The forecast is for no change, on the June reading of 10.4.
08:30, currency impacted GBP. Net Consumer Credit (MAY). The prediction is for a reduction in credit to 1.4b, from 1.5b in April.
08:30, currency impacted GBP. Net Lending Sec. on Dwellings (MAY). Lending on property is forecast to slip to 2.6b, from 2.7b in April.
08:30, currency impacted GBP. Mortgage Approvals (MAY) the expectation is for a modest fall to 64.0k, from 64.6k in April.
12:00, currency impacted EUR. German Consumer Price Index (YoY) (JUN P). The forecast is for a small reduction to 1.4%, from 1.5% in May.
12:30, currency impacted USD. Gross Domestic Product (annualised) (1Q T). The forecast is for USA GDP YoY to remain at 1.2%.
12:30, currency impacted USD. Initial Jobless Claims (JUN 24). Initial claims are predicted to fall to 240k, from 241k.
23:01, currency impacted GBP. GfK Consumer Confidence Survey (JUN). U.K. confidence is forecast to fall to -7, from -5.
23:30, currency impacted JPY. National Consumer Price Index (YoY) (MAY). Japan’s main inflation reading is expected to rise to 0.5% annually, from 0.4% in April.