Market Info

Theresa Mays leadership is thrown into doubt

06/10/2017 | OzForex

United States Dollar:

The dollar hit seven-week highs versus a basket of currencies through Thursday following another strong day at the office for the Greenback. Congressional Republicans moved to hasten an overhaul of the U.S. tax code on Thursday, with the Republican-controlled House of Representatives approving a fiscal 2018 spending blueprint to help advance an eventual tax bill. The greenback was boosted after the U.S. Department of Labor said initial jobless claims fell more than expected to 260,000 last week. Additional reports showed that the U.S. trade deficit narrowed in August, as exports climbed to a two-and-a-half year high, while factory orders increased more than analysts had projected. We heard from Philadelphia Federal Reserve Bank President Patrick Harker yesterday too, he was quoted as saying he is still planning on one more rate hike this year and three next year. On to today attention now turns to the US job data for September. The data is expected to show a slowdown in jobs growth, reflecting the effects from Hurricane Harvey and Irma but most are predicting a rise of between 90k to 100k.

With very little in the way of economic releases yesterday the Pound was in free-fall. Concerns about Mays leadership hit the Pound early on Thursday morning and it was the same story for most of the day. Even the hawkish BoE policymaker Ian McCafferty failed to stop Sterling’s decline. McCafferty has said that there is evidence of a closing output gap in the UK economy, quoted as saying that “while Brexit uncertainties are an important consideration, we are currently facing an economy, according to our latest forecast, in which the little slack that currently remains is likely to disappear quite quickly, while inflation is projected to persistently overshoot the target,”. Early this morning a few tabloids have reported May could be resigning from her position today and a former Conservative Party chairman claimed the support of 30 lawmakers for a plot to topple her. Currency markets have reacted to the news and GBP/EUR dropped from 1.1220 to 1.1175 and cable broke below the 1.30 handle hitting a 4-week low of 1.3065. Today we are scheduled to hear from MPC Member Haldane.

We expect a range today in the GBP/USD 1.3010 to 1.3100

Euro:

The only notable release of yesterday out of the Eurozone was the ECB meeting minutes, not much of a market mover against Sterling but the Euro did weaken against the USD. The minutes showed that members remain concerned over the volatility of the single currency and some suggested that the economy may still need substantial stimulus for a little longer period of time. For today we have already seen German factory orders month on month post a 3.6% improvement where a 0.7% was forecast, we end the week on a quiet note but political concerns over Spain still persist. It had been reported Catalonia was due to announce its independence on Monday however, Spain's Constitutional Court on Thursday ordered the suspension of Mondays session throwing into doubt its plans to declare unilateral independence from Spain. This certainly won’t be the last we hear on this subject so markets will still remain cautious heading into next week.

We expect a range today in the GBP/EUR rate of 1.1110 to 1.1210

Aussie and Kiwi Dollars:

It’s been a quiet day for the Australian Dollar so moves have been limited. The Aussie was still feeling the effects after posting a poor retail sales number the previous day casting doubts over a near term rate hike. Construction data overnight showed the industry expanded for an eighth consecutive month in September, although the pace of growth moderated slightly from August. For the antipodean currencies attention now turns to key wage growth and non-farm payroll prints this afternoon as the primary drivers into the weekly close.

With a quiet day on the domestic front the Kiwi hit a 4-month low against the USD. GBP/NZD traded sideways for the most of the day. To close the week off the kiwis moves will be dictated from the US data later today.

We expect a range today in the GBP/AUD rate of 1.6760 to 1.6850

We expect a range today in the GBP/NZD rate of 1.8370 to 1.8470

Data Releases

AUD: No data

EUR: Italian Retail Sales m/m

GBP: MPC Member Haldane Speaks

NZD: No data

USD: Average Hourly Earnings m/m, Non-Farm Employment Change, Unemployment Rate

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