BoE Governor Carney and the GBP in Focus

A quiet day on the economic data front leaves the markets to consider what lies ahead, while BoE Governor Carney could catch the markets napping this morning should he deliver a surprise on the policy front. · FX Empire

Bob Mason

Updated Mon, May 21, 2018, 11:23 PM

Earlier in the Day:

It was a particularly quiet Asian session on the economic data front, with no material stats released, leaving the markets to consider current positions and what lies ahead, with a mass of central bankers scheduled to speak, non-voting members Harker and Kashkari having shared their relatively dovish views overnight.

The morning saw the Greenback in reverse, providing some much needed respite to the majors, with the Japanese Yan up 0.09% to ¥110.95 at the time of writing, supported by a sell-off in the Asian equity markets, the majors ignoring the Monday gains in the U.S and an easing in the risk of a U.S – China trade war.

In spite of the softer U.S Dollar, the Aussie Dollar gave up some of Monday’s gains, down 0.07% to $0.7577, while the Kiwi Dollar down just 0.01% to $0.6945, the Kiwi Dollar looking ahead to April’s trade figures due out on Thursday.

In the equity markets, the ASX200 was going for its 4^th consecutive day in the red, down 0.80% at the time of writing, while the Nikkei and CSI300 were down 0.13% and 0.72% respectively, the HK markets closed for the day.

Moves through the morning suggested that the Asian markets may not be as convinced of a path towards a reasonable resolution to the current trade dispute between the U.S and China, with a slide in metal prices doing little to help the cause for the ASX200 at least.

There’s a long way to go before the U.S and China reach any kind of consensus on trade, if the NAFTA talks are anything to go by, and the long road will certainly support a pickup in volatility across the equity markets and commodity currencies.

The Day Ahead:

For the EUR, it’s another quiet day on the economic calendar, with no material stats scheduled for release through the day.

Rising borrowing costs in Italy, following the 5 Star – League coalition announcement will be of particular concern for the markets, with the market’s fear being a repeat of the Greek crisis just a few years ago, the coalition government expected to deliver a number of demands to Brussels that are unlikely to be well received.

Developments in Italy will continue to impact the EUR for some time, with the Italian collation government’s intention to increase spending and cut taxes expected to deliver a blow to the Eurozone’s 3^rd largest economy.

With the ECB monetary policy meeting minutes out on Thursday and prelim May private sector PMI numbers due out tomorrow, $1.16 levels could come into play in the coming week, though it’s not just the ECB meeting minutes the markets will need to contend with, as the FED releases its minutes the day prior to the ECB’s.

At the time of writing, the EUR down 0.15% to $1.1754, with sentiment towards Italy weighing through the morning and likely to pin back any major moves through the day.

For the Pound, it’s the calm before the storm, with economic data scheduled for release today limited to May’s CBI Industrial Trend Orders figures.

While the numbers traditionally have an influence on the Pound, BoE Monetary Policy Committee members Ramsden, Saunders, Vlieghe and Bank of England Governor Carney could steal the show this morning, should any references to monetary policy be made.

Carney and team could certainly provide the Pound with direction today, though with inflation and retail sales figures scheduled for release on Wednesday and Thursday, MPC members may decide to tone it down, the outlook for monetary policy through the middle of this year likely to be hinged on this week’s numbers.

At the time of writing, the Pound was down 0.07% to $1.3417, with any noise from Brussels on Brexit also a factor, though the Establishment may have its hands full with an anti-EU government now in the heart of Europe.

Across the Pond, it’s another quiet day on the data front, with no material stats scheduled for release leaving the markets to consider the Red Book’s release this afternoon, ahead of tomorrow’s private sector PMI numbers and all-important FOMC policy meeting minutes.

At the time of writing, the Dollar Spot Index was down 0.06% to 93.618, with direction through the day likely to be hinged on noise from the Oval Office and market sentiment towards the U.S administration’s announcement to hit the pause button on trade China tariffs.

Across the border, the Loonie’s back in action, with May wholesale sales figures scheduled for release, focus expected to move back to the data near-term as NAFTA trade talks continue on in the background. Today’s figures are forecasted to be Loonie positive, with more support expected from another move in crude oil prices.

At the time of writing, the Loonie was up 0.05% to C$1.2782 against the U.S Dollar.

This article was originally posted on FX Empire