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Trade concerns resurface, UK CPI in focus

Trade concerns resurface, UK CPI in focus

The slump in sterling yesterday over fears of a no deal Brexit helped the FTSE 100

The internationally focused equity benchmark received a boost from the slide in the pound. It was reported that Boris John’s campaign team are considering using the Queen’s speech as tactic to prevent Parliament from rejecting a no-deal Brexit, and that weighed on the pound.

Should Mr Johnson become Prime Minister, there is talk he might table a Queen’s speech for early November, and seeing as it is tradition for MPs not to sit in Parliament for approximately two weeks in advance of the event, it could be used as tool to halt lawmakers from preventing the UK leaving the EU without a deal.

The political fear surrounding Brexit took away from the respectable figures released from the UK earlier in the day. The unemployment rate held steady at 3.8%, meeting forecasts. Average earnings excluding bonuses rose to 3.6% from 3.4%. UK CPI is 2%, so workers are getting a nice increase in real wages, and that should bode well for the economy. This morning, the latest UK inflation report will be released, and economists are expecting it to hold steady at 2%, and the core rate is expected to rise to increase to 1.8%, from 1.7%.  

President Trump kept equity traders on their toes yesterday when he said the US and China have a ‘long way to go’ in relation to working out a trade deal. The US leader also warned he could slap tariffs on $325 billion worth of Chinese goods ‘if we want’. The announcement was aimed at Beijing, but the Chinese authorities don’t have a history of giving in to his threats. US equity markets ended a little lower last night, and stocks in Asia are in the red as trade worries resurface.

US retail sales in June increased by 0.4% on a monthly basis. The unemployment rate is near a 50-year low, average earnings are 3.1%, which is comfortably outstripping the inflation rate, and it is clear that workers are content to go out spend their hard earned money.   

Eurozone CPI will be posted at 10am (UK time), and is expected to remain at 1.2%, and the core reading is tipped to stay at 1.1%. Christine Lagarde, the head of the IMF, has been nominated to be next head of the ECB, and she is known to hold a dovish view, and any sign of weakness in the currency bloc is likely to ramp up speculation of monetary easing.

At 1.30pm (UK time), the US will release the building permits and the housing starts reports, and traders are expecting 1.3 million, and 1.26 million respectively.

Canadian inflation will be released at 1.30pm (UK time), and it is expected to cool to 2%, from 2.4%.

The Energy Information Administration report will be posted at 3.30pm (UK time), and oil stockpiles are anticipated to fall by over 2.6 million barrels, Keep in mind, last week oil stockpiles dropped by over 9 million barrels. Gasoline inventories are expected to decline by 925,000 barrels.

EUR/USD – has fallen back into the wider downtrend and a move back below 1.1200 might pave the way for the 1.1110 area to be retested. 1.1400 might act as resistance.

GBP/USD – has been driving lower since mid-March, and a break below the 1.2365 region, might bring 1.2109 into play. The 1.2600 area might act as resistance.

EUR/GBP – has rallied for over two months, and if it holds above 0.8872, it might bring 0.9116 into play. A move to the downside might bring the 200-day moving average at 0.8787 into play. 

USD/JPY – has been in a down trend since late April, and if the bearish move continues it might target the 106.00 mark. Resistance might be found at the 50-day moving average at 108.73.






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