Jul 12 • Morning Roll Call • 1657 Views • Comments Off on MORNING ROLL CALL

U.S. equity markets recover from mid session shock, sterling slumps due to the foreign minister’s reckless comments

It’s been a few weeks since we’ve witnessed a high ranking politician move the markets with a reckless comment, or errant tweet. The analyst community is now continually on a high level of preparedness, always ready to handle the clumsy missives emanating from Donald Trump. But on Tuesday, the UK’s foreign minister, Boris Johnson, actually ‘trumped’ Trump in terms of baffling recklessness. Johnson stood up in the UK’s House of Commons to inform the gathered MPs that the European Union could “go and whistle” for any repatriation that may be legally due when the UK finally Brexits. It didn’t take much time for analysts and investors to join the dots on this statement; don’t pay, no trade deal, hard Brexit, WTO rules, U.K. currency and economy collapses.

Now whilst it’s tricky to put an exact figure on just how much this bizarre, unprofessional remark damaged sterling, so let’s attempt to calculate it. Our FX industry turns over $5 trillion a day, sterling is one of the five major currencies, his remark caused a loss of circa 1%. Did Boris Johnson cause a £100 billion loss in sterling’s value inside minutes? Having initially fallen through S2 early in the London trading session, EUR/GBP smashed through R3, ending the day at circa 0.8924, just short of the critical 0.900 handle. Not a great present for UK holidaymakers, about to embark on their summer holidays. GBP/USD fell by circa 0.5% to 1.2844, whilst sterling also fell versus the majority of its peers.

The euro enjoyed positive sessions on Tuesday, EUR/USD crashed through R3 ending the day up circa 0.6% at 1.1461, and versus the majority of its peers the euro made positive gains, with R2 or R3 breached versus the: Aussie, Loonie, Swissie and yen. Despite the euro advancing, the main European indices sold off, STOXX 50 closed down 0.39%, DAX down 0.07%, CAC down 0.48% and the FTSE down 0.55%.

The U.S. markets also endured a shock reaction on Tuesday, after Donald Trump’s son revealed that he’d shared emails with Russian lawyers and counterparts in the general election, who were conspiring with the Russian government, attempting to favour Trump and harm Trump’s opponent, Hillary Clinton. As the news broke the DJIA and SPX slumped by circa 0.5% in an instantaneous spike. Yet another example of reckless politicians (and their offspring) usurping fundamental and technical analysis.

The DJIA ended the day flat and the SPX down 0.05%, whilst the NASDAQ gained circa 0.27%. USD/JPY ended the day down circa 0.1% at 113.90. West Texas Intermediate crude rose 1.6% to end the day at approx. $45.31 a barrel, and on Wednesday the U.S. government will publish data which may reveal that oil stockpiles declined further. Gold rose by approx. 0.2% to $1,216 an ounce, adding to its marginal increase on Monday. However, the collapse in value, since early June’s 2017 high of circa $1290 per ounce, has been quite dramatic.

Economic calendar events for July 12th, all times quoted are London GMT time

08:30, currency impacted GBP. Average Weekly Earnings (3M/YoY) (MAY). The forecast is a fall to 1.8%, from 2.1% in April.

08:30, currency impacted GBP. Weekly Earnings ex Bonus (3M/YoY) (MAY). The prediction is for a rise to 1.9%, from 1.7% in April.

08:30, currency impacted GBP. ILO Unemployment Rate (3M) (MAY). The rate is expected to remain unchanged, at 4.6%.

09:00, currency impacted EUR. Euro-Zone Industrial Production w.d.a. (YoY) (MAY). The forecast is for a significant increase to 3.5%, from the 1.4% recorded for April.

11:00, currency impacted USD. MBA Mortgage Applications (JUL 07). The prediction is for an improvement on the 1.4% increase registered last week.

12:30, currency impacted USD. Fed Releases Chair Yellen’s testimony to Congress. Mrs Yellen will deliver one of her scheduled addresses to congress, an appearance that has the ability to move markets in the dollar and U.S. indices.

14:00, currency impacted CAD. Bank of Canada Rate Decision (JUL 12). The forecast is for the central bank to raise rates to 0.75%, from 0.50%. If so the Canadian dollar may rise significantly.

14:00, currency impacted CAD. Bank of Canada Releases July Monetary Policy Report. As the rate decision is released, the BOC will also publish its latest policy report.

14:00, currency impacted USD. Yellen to Appear Before U.S. House Panel. A busy day for Mrs. Yellen, with her second major appearance of the day.

14:30, currency impacted USD DOE U.S. Crude Oil Inventories (JUL 07). Oil has recovered over recent days, the forecast is for a fall of -2850k from -6299k, last week’s figure.

15:15, currency impacted CAD. BOC’s Poloz and Wilkins Hold Press Conference in Ottawa. Two leading BOC officials will hold court after the rate announcement and publication of the last policy report.

18:00, currency impacted USD. U.S. Federal Reserve Releases Beige Book. The beige book concerns certain economic conditions various Feds have discovered through their data.

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