Daily Brief

Daily Brief

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The duel for Downing Street begins

Clash of the Tory titans 

Tory leadership hopefuls have until 5pm today to garner the support of eight MPs or they will be removed from the race. With Theresa May’s undoing being Brexit, many candidates who have thrown their hat in the ring are announcing how they’d handle Brexit if they were PM. Esther McVey and Michael Gove clashed over the idea of shutting down Parliament to force through a no-deal over the weekend, with bookies outsider Sam Gyimah calling for a second referendum.  

With a new leader not expected to be announced until mid-July, we’ve got a lot of leadership news, including allegations of drug-taking by a number of candidates, to deal with over the next month. Whoever wins will shape the course of Brexit, ultimately impacting forex markets. 

International Trade Secretary Liam Fox has also been busy in the background of Brexit, wooing South Korea with a post-Brexit free trade deal. This marks the first deal the UK has secured in Asia once Brexit is over, and is key to maintaining trade arrangements covering car and auto part exports. 

Finally in GBP news, London Tech Week launches today. With more than a third of Europe’s fastest-growing tech companies now based in Britain, this event is one to watch for business and investment news this week. 

The pound reacted negatively to the UK economy data release today. Stats show it shrunk by 0.4% in April, and while markets had expected a disappointing number, it was worse than expected. Sterling fell against both EUR and USD. 

Trump’s trade tariff triumph

President Trump has hailed the deal reached with Mexico as a ‘triumph.’ He threatened to impose trade tariffs if the flow of Central American migrants wasn’t dealt with, proposing a rise in duties by 5% every month until October. Providing much-needed relief to a rocky relationship and market, the Mexican peso responded with a jump

The ECB is also reportedly concerned about the EUR/USD exchange rate in the wake of the new US-Mexico trade tariff agreement, but aside from Italy’s industrial production stats for April, a quiet day for the Euro is expected, with France, Germany and Switzerland all on a Bank Holiday.

Back to the US and data releases to watch for this week include Core CPI and retail sales, both key to how the Fed decides rate cuts to support growth. For Europe, the Swiss National Bank’s policy decision later this week, where the SNB are predicted to hold interest rates, could be influential on global trade and FX. 

Positively Pacific 

Japan’s economy beat expectations of 2.1% growth YOY with 2.3% in Q1. While trade tensions between US and China still impact Japan, the world’s third largest economy, higher capital spending boosted GDP. Nonetheless, the data from the Cabinet Office displayed signs of concern surrounding consumer spending, which is in decline. The Yen and USD remains mostly unchanged on the news. 

Further down the Pacific and the Aussie had climbed to near one-month highs as the Fed could mirror the RBA in lowering borrowing costs. The NAB business confidence index release tomorrow and the latest employment report due Thursday could push up AUD, but job numbers will need to improve after April’s poor performance. 

GBP: Tory leadership race weighs on Brexit future

GBP: Tory leadership race weighs on Brexit future

EUR: Quiet with a number of bank holidays across Europe

EUR: Quiet with a number of bank holidays across Europe

JPY: GDP growth but the Yen mostly unchanged

JPY: GDP growth but the Yen mostly unchanged

USD: Big data releases later in the week due

USD: Big data releases later in the week due

MEX: Peso performs off back of US trade deal

MEX: Peso performs off back of US trade deal

AUD: Employment data this week could have some impact

AUD: Employment data this week could have some impact

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