Good morning.
UK leadership contest narrows
The 1.30 level’s proven to be a tough nut to crack in GBP/USD with so much negative newsflow still circulating for the pound. Despite the narrowing of the Conservative party leadership contest, we’ll still be without a dedicated leader until at least early September, so expect another protracted period of political campaigns, soundbites and vox pops where much attention is paid to the battle of Andrea Leadsom and Theresa May and little attention is paid to what is actually going on in Westminster. Markets will closely watch the debate between the two prospective leaders, particularly as they outline what their approaches would be at the negotiating table with the European Union and how the UK will (or will not) access the Single Market. Second only to monetary policy, this is one of the most important factors for UK markets right now.
UK trade balance data close to irrelevant
Today’s UK trade figures are expected to show the UK remained in a sharp trade deficit with both the European Union and those states outside the EU. This data will become increasingly relevant as the months go by, but this won’t start today as the figures encapsulate May’s pre-referendum trade numbers. While sterling remains weak, UK goods and services being sold overseas will become some of the most competitive in the global marketplace, and trade balance data will be one of the first pieces of evidence that could show this effect.
Nonfarm Payrolls expected to bounce back
After creating a mere 38,000 jobs in May (the lowest level of jobs growth since September 2010, where the US actually lost 52,000 jobs), the US is expected to bounceback this month by adding 180,000 jobs as one-off effects including a strike at telecoms giant Verizon Communications roll off and push the headline figure higher. If these one-off factors are ruled out, it still shows the US jobs market ticking higher at a far slower rate than the past five years, where jobs growth averaged over 200,000 per month. These figures should prove troubling for the Federal Reserve who continue to appear keen to wean the US economy off record low interest rates despite the economy actually decelerating.
Have a great weekend.