GBP - British Pound
GBP/USD dropped below 1.25 for the first time since January on Friday as ongoing concerns over Brexit and a dollar rally pushed cable lower. At present the pound is in a wait and see mode as the two candidates to be the next leader of the Conservative Party, Jeremy Hunt and bookies favourite Boris Johnson tour the country taking part in debates in front of Tory party members who have begun voting who will be the next Prime Minister. The result will be announced the week commencing 22nd July with comments on Brexit once confirmed likely to be the next big drivers for sterling. Hunt has stated he would prefer a deal and would be open to extending Article 50 again should it be needed. Johnson has also said he prefers a deal however has been more explicit in his belief that he is willing to leave without a deal should we get to Halloween without one. There are rumours that a General Election may be called once BoJo comes to power in an effort to increase the Tory share of the vote and give him a mandate to push through his own type of Brexit strategy.
Data-wise, last week painted a picture of a UK economy grinding to a halt with all three monthy PMI surveys falling short of expectations. The most eye-catching (if not the most high impact) was the construction PMI which posted its worst reading since May 2009 at 43.1 far worse than the 49.4 predicted. The dominant services sector printed 50.2 with the authors expecting Q2 GDP figures to print -0.1% compared to the previous three months. We may be get a better idea of what to expect when m/m GDP from May-June is released on Wednesday. GBP/USD trades at 1.2520 with GBP/EUR at 1.1150.
Last week's big news was Friday's US jobs report which saw the US dollar rally as a result. The headline Non-Farm Payrolls number showed an extra 224k people added to the workforce for June, three times more than last month and far higher than the 162k eyed. Tempering the positive result was an unexpected uptick in unemployment to 3.7% from 3.6% and wage growth held steady at 0.2% m/m when a move to 0.3% m/m was expected. Despite this, the strong headline figure saw the dollar gain across the board with EUR/USD dropping around 60 pips throughout the afternoon and USD/JPY moving up to 108.60 from around 108. Markets are still expecting a cut in rates from the Federal Reserve at the end of the month however further cuts later in the year have now been called into question. Fed Chairman, Jay Powell is due to speak at an event at the Boston Fed tomorrow however we are likely to get more detail on his thoughts re: monetary policy on Wed/Thurs as he delivers two days of testimony to the Senate Banking Committee in Washington.
Greece has elected a new government overnight with Kyriakos Mitsotakis's New Democracy party seizing power from incumbent Alexis Tsipras's Syriza party. Mr Tspiras took power whilst Greece was in the midst of its financial crisis however lost support from the electorate as he was forced to implement painful austerity measures in return for another bailout from the EU.
Other events this week include the minutes from the last FOMC and ECB interest rate decisions due on Wednesday and Thursday respectively. EUR/USD sits at 1.1230 with USD/JPY at 108.33
1.2480 - 1.2590 ▼GBP/EUR:
1.11 - 1.1210 ▼GBP/AUD:
1.7850 - 1.8020 ▲GBP/NZD:
1.8760 - 1.8920 ▲GBP/CAD:
1.63 - 1.6445 ▼