Brexit and US-China trade talks rule the roost

Today’s macro highlights:

  • EUR - CPI (July)

  • USD - University of Michigan Sentiment (August)

Brexit and US-China trade talks rule the roost

The Pound saw some upward movement yesterday thanks to strong retail sales but remained restricted by concerns about the direction of Brexit talks which took place in Brussels yesterday. Some recovery was seen in the Euro following signs of stabilisation in the Lira as the Turkish finance minister took to the stage to reassure investors. The central bank’s intervention plus news of Qatar’s $15 billion investment pledge have helped shore up the Lira (and in turn the common currency) somewhat in recent days. As Turkish tensions eased and news broke that the US and China are to hold a new round of trade talks later in August, so the Dollar’s run pulled back somewhat. A disappointing read on the Philly Fed business index (which fell to its lowest level since November 2016) also weighed on the Greenback.

The day ahead holds eurozone CPI which likely deteriorated compared to last month. A very disappointing read could negatively impact the Euro as investors may view it as justifying the European Central Bank’s caution. That said, these are final figures so are not likely to deviate significantly from previous readings and geopolitical risk is still anticipated to be the main driving force behind the common currency for now. Elsewhere, the University of Michigan indicator of US consumer confidence is expected to show a bit of an improvement.  

GBP/USD

With no significant data due for release today, cable will likely be moved by the headlines out of yesterday’s Brexit talks in Brussels. Negotiators met to try reach an agreement on how to deal with the Northern Irish border. Any positive progress will likely prop up the pair today.

EUR/USD

The pair recovered from yearly lows, helped by optimism about the Turkish crisis and renewed trade talks between China and the US. Although European inflation is due for release today, it might not move the needle on the currency too much given the market’s preoccupation with geopolitical risk.

GBP/EUR

The pair traded largely flat on the day. Brexit talks and an easing of Turkish troubles will likely drive the direction today.