Good morning,
Dollar quietly pulls to 5 week high
The USD has pushed to a 5 week high overnight on not much news and that really characterises a market that is trading sideways and waiting for news flow to move it one way or the other. This dollar strength comes despite a run of poor US data in the past few weeks and a very unsure political situation. The Supreme Court’s decision to clear the vast proportion of the Trump travel ban may have an effect on the passage of the Trumpcare plan that is set to be debated further later this week.
MayDUP
The announcement of a confidence and supply deal between the Conservatives and the Democratic Unionist Party gave sterling a little nudge higher yesterday. The DUP will vote with the Conservatives on any confidence votes against the government as well as on Budgets and bills pertaining to Brexit and national security. The political climate will still have a deleterious event on sterling through the 2nd half of the year but the deal does limit the chances of a Tory leadership contest or another general election in the coming months. The EU has asked for further details on the Prime Minister’s plans to allow EU citizens to stay in the UK following Brexit.
This will not be the last time that the EU sends the UK back to sharpen up its homework.
Carney to set record straight
Following a week of chatter around the possibility of an interest rate hike in the UK, Governor Mark Carney may use a speech in Portugal this lunchtime to set the record straight. He has said that it is “not the right time” for rates to rise as recently as 10 days ago and while there are significant concerns around the levels of consumer credit in the UK economy we think that it would be strange for the Governor to change tack so quickly.
He speaks at 11am BST.
Yellen to speak in London later today
Elsewhere, Fed Chair Janet Yellen speaks in London at 7pm BST tonight and dollar bulls will be looking to her comments for an idea as to whether the hikes that we have seen in the first half of the year are something that may be replicated sooner rather than later.
Have a great day
Jeremy Cook, Chief Economist