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After the exciting (if not concerning) week that was, foreign exchange markets have begun the new week on a much calmer note. However, with underlying drivers remaining in place, we await the next spark to ignite the political flames.
In US politics, President Trump’s tour of the Middle East has helped to allay whispers for impeachment following the FBI debacle of last week, whilst despite official negotiations not being scheduled to begin for another month, Brexit remains top of the billing for both the Euro and Pound Sterling, as teams on either side of the negotiating table trade fierce statements.
The former has seen the US dollar basket – a measure of USD against a trade-weighted basket of its peers – fall to a fresh 6-month low, while Sterling has struggled against its European counterpart as government ministers support their ability to ‘walk out’ on negotiations should the divorce bill for the UK be around the reported €100bn mark, This comes despite the British currency closing above $1.30 against the US dollar for the first time since late December.
Furthermore, the pound could find itself facing further weakness should the polls in the UK election continue to narrow after YouGov reported that the Conservative Party lead over Labour fell to single digits for the first time (44% vs 35%). Is this a blip or will the red renaissance continue?
But it’s not just politics that are likely to move FX markets this week. A wealth of macroeconomic data from both sides of the Atlantic could potentially drive sentiment throughout this week as investors digest several top tier releases and the all-important minutes from the Federal Reserve’s May meeting on Wednesday.
Those aforementioned FOMC Minutes will be released on Wednesday evening and will be heavily scrutinised by investors as the central bank’s 14 June meeting moves ever closer. Even more importance will be placed on the minutes following last week’s explosive allegations against US President Trump, which saw the probability of a June rate hike fall from highs of 100% to 82.5% on Wednesday according to Fed Fund futures. Although this probability has now recovered to 100%, could Trump’s return from his Middle Eastern tour provoke the re-ignition of US political concerns and throw a Fed rate hike in June back into question?
Headlining the rest of the week’s offerings are the final reading of German GDP (Tuesday, 7pm) as we check on the health of the Eurozone’s engine room, US Existing Home Sales (Wednesday, 3pm) for a look at the underlying strength of the US housing market – a key barometer of stateside economic health, the second reading of UK GDP (Thursday, 9:30am), expected to be confirmed at 0.3% QoQ and 2.1% YoY, and the second reading of US GDP (Friday, 1:30pm), although more focus may be placed on Personal Consumption figures for another look into the state of inflationary pressures before the Fed’s meeting in June.
Key data this week (Sign up here to get our daily live macro-calendar)
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UK Economic Announcements
00:01 Rightmove House Prices
Intl Economic Announcement
13:30 Chicago Fed (US)
14:00 Leading Economic Index (CN)
UK Economic Announcements
09:30 Public Sector Net Borrowing
11:00 CBI Reported Sales
Intl Economic Announcements
01:30 Nikkei Manufacturing PMI (JP)
07:00 GDP (DE)
07:45 Business Confidence (FR)
8-9am Manufacturing & Services PMIs (Various European)
09:00 IFO Surveys (DE)
14:45 Manufacturing & Services PMIs (US)
15:00 New Home Sales, Richmond Fed (US)
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Intl Economic Announcements
01:30 Westpac Leading Index (AUS)
07:00 GfK Consumer Confidence (DE)
12:00 MBA Mortgage Applications (US)
14:00 House Price Index (US)
15:00 Existing Home Sales (US)
15:00 Interest Rate Decision (CAN)
15:30 Oil Inventories (US)
19:00 FOMC Minutes (US)
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UK Economic Announcements
09:30 GDP, Index of Services, BBA Mortgage Approvals, Business Investment
Intl Economic Announcements
08:00 GDP (SP)
13:30 Wholesale Inventories, Weekly Jobless Claims (US)
16:00 Kansa Fed Manufacturing Index (US)
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Intl Economic Announcements
00:30 CPI (JP)
09:00 Business & Consumer Confidence (IT)
13:30 GDP, PCE, Durable Goods (US)
14:30 Corporate Profits (US)
15:00 University of Michigan Sentiment (US)
18:00 Baker Hughes Rig Count (US)
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