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The administration will/will not intervene

USD

Friday's data for second quarter gross domestic product were stronger than forecast. The economy grew at an annualized rate of 2.1% in Q2, slower than the 3.1% growth achieved in Q1 but ahead of the 1.8% predicted by analysts. The figures were positive for the USD but did not immediately send it higher.

That was because Larry Kudlow, the president's economic advisor, was telling Fox news that the Fed should slice three quarters of a percentage point off its Funds rate on Wednesday, rather than chipping away at it 25 basis points at a time. Mr Kudlow also said the administration has "ruled out" intervening to weaken the USD. His boss did not entirely agree, telling reporters "I didn't say I'm not going to do something [about the dollar]". On average, the data and comments were positive for the USD.

EUR

Friday's French and Italian confidence measures had little impact on the euro and were quickly forgotten. The same is likely to be true of this morning's Spanish inflation and retail sales figures. Retail sales looked reasonably healthy in June, up 2.4% from the same month last year. Inflation was less helpful, accelerating from 0.6% to 0.7% by one measure and from 0.4% to 0.5% by the other.

The euro did not really get involved on Friday or this morning. It is 0.1% lower against the USD after several changes of direction.

CAD

The Loonie ended an almost entirely data-free week with nothing to say for itself. Even oil prices had no influence in either direction: WTI crude was 3¢ lower on the day, a move of less than 0.1%.

The CAD was no more active. It is 0.07% higher against the USD.

GBP

Today's money and credit data from the Bank of England were reasonably constructive for the pound. Personal loans increased to £4.8 billion in June from £3.8 billion the previous month and the number of mortgage approvals increased slightly to 66,440.

There was nothing constructive about the Brexit narrative. Minister Michael Gove confirmed at the weekend that the government is "working on the assumption" of no deal and he will head a special committee to plan for that outcome. Investors have been forced to take seriously the idea that the Prime Minister intends to crash Britain out of the EU in three months' time, whatever the consequences. At the weekend Carlos Tavares, the head of French auto maker PSA, said he would end production of the Vauxhall/Opel Astra in Britain "if the conditions are bad and I cannot make it profitable". Separately, the CBI reported that neither the UK nor the EU is prepared for a no-deal Brexit and that "even with mitigation, no fewer than 23 of 27 areas of the UK economy would experience disruption". Sterling is the weakest among the majors, down by 0.9% and at its lowest level in more than two years.

JPY

Retail sales in Japan were unchanged between May and June. They were up by 0.5% compared with the same month last year. The JPY popped higher overnight (unrelated to the sales data) before giving it all back over the following six hours. It is unchanged on the day against the USD.

Tonight the Bank of Japan is expected to commit to keeping interest rates "extremely low" until next year. The only question is whether it will extend that period beyond its current horizon of spring 2020. 

USD: Good data, confusing story

USD: Good data, confusing story

EUR: Not happening

EUR: Not happening

CAD: Dead still

CAD: Dead still

GBP: Hard Brexit alarm rings

GBP: Hard Brexit alarm rings

JPY: BoJ expected to hold steady

JPY: BoJ expected to hold steady

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