USD

In the wake of Thursday's confusion about the Federal Reserve's policy intentions (25 or 50 basis points to be lopped off the Funds rate next Wednesday), it took nearly 24 hours for the USD to recover its equilibrium. Comments by James Bullard and Eric Rosengren on Friday helped to persuade investors that there will not be a half-point cut: The St Louis Fed president wants a quarter-point reduction and his opposite number in Boston would rather leave the Funds rate where it is.

The only ecostat on Friday was the provisional consumer sentiment index from the University of Michigan. At 98.4 it was a touch higher on the month and just short of the predicted 98.5. Investors were only briefly disappointed.

EUR

This morning Germany's central bank, the Deutsche Bundesbank, will publish its monthly report. It is the only event of any importance on the EUR's agenda today.

The euro faded during the European day on Friday and stabilized in the second half of the New York session. It is 0.3% lower against the USD.

CAD

Tensions in the Arabian Gulf went up a notch when Iran seized a British-flagged oil tanker. Oil prices reacted in the usual way but did not move far. WTI crude is less than 2% higher on the day.

The CAD might have got off to a good start had it not been for the Canadian retail sales data. Investors were expecting to see a 0.4% monthly increase for May, excl. autos. Instead, they saw a 0.3% decline. The Loonie took an almost instant half-cent hit. It did not stay down though, and the recovery began within less than half an hour. The CAD is unchanged on the day against the USD.

GBP

After a good day on Thursday, Friday saw a return to form by the GBP. It is 0.4% lower against the USD.  

There were no UK economic data this morning but the National Institute of Economic and Social Research released a new set of forecasts which see the UK economy expanding by 1% this year and 1% in 2020, even if there is a smooth exit from the EU. "The outlook worsens if there is a no-deal Brexit, with NIESR seeing the possibility of a 'severe' downturn in the event of a disorderly departure. Even if an 'orderly' no deal exit is secured, NIESR says the economy will stagnate next year, with inflation accelerating to 4.1% as the pound drops about 10%”. There is a one in four chance that the economy is already shrinking.

JPY

There were no Japanese ecostats this morning and there are none for Tuesday either. Bank of Japan governor Haruhiko Kuroda will be making a speech this morning at the International Monetary Fund in Washington DC.