Good morning,
Seen it before, see it again
The long weekend has yielded little change to the forces affecting currency markets currently; Trump and Korea are still banging away at each other, Macron & Le Pen are 6 days away from the final vote of the French election and a month after the triggering of Article 50 it is becoming clearer that whatever mandate Theresa May could win in 5 weeks’ time will get short shrift in Brussels.
While the UK and most of Europe was closed yesterday the US session was alive and well with the dollar strengthening against both the pound and the yen. Sterling lost ground following the publication of an article in the German newspaper FAZ that apparently showed just how badly a dinner between Theresa May and Jean Claude Juncker went a few months ago.
Dinner theatre for Brexit
According to the article, May’s timeline on issues such as the rights of UK migrants in the EU and vice versa as well as issues such as the Irish border would be solved quickly, possibly by the end of June. This was rather shot down by the European Commission Head with the whole thing ending up rather avaricious. Any hints or desires for these negotiations to be in anyway secret have finally been buried and while the UK parliament will not officially be scheduled time on the matters within the negotiations, the leaks from the talks will find their way into every political conversation for the next 23 months.
There is still little movement on when the talks will actually begin. There are EU Council meetings upcoming and it is not a surprise that this article appeared only a few days after an EU Council meeting that showed off an air of European togetherness. Things may pick up once we have found out who the new President of France is but then we are back into election mode in Germany and a split vote and coalition building could take the time needed for a formation of a German government well passed the September election and into November. Article 50 could not have been triggered at a busier time.
Sterling slipped a little in thin trade yesterday but the 1.30 level in GBPUSD still looks very inviting.
Yen lower and dollar could be in for a strong week
The yen fell following reports that Trump stated that he would be happy to meet Kim Jong Un if the conditions were right.
This week is stuffed to the gunnels with economic data and surveys from the global manufacturing sector are the order of the day today. In the UK that once again means a focus on the costs that manufacturers are facing and how able they are to pass those on to consumers.
Tomorrow’s rate decision in the US will offer little insight and we think rates will remain as they are; markets are only pricing in 14% chance of a hike tomorrow but with political news in the UK, Europe and the Korean peninsula still flying around we would not be surprised if investors bid up the USD this week in response.
Have a great day