As mentioned in this report yesterday, the focus this week will be dollar weakness, Monday we saw the US Treasury Yields retreat, the 10-year Treasury Note was lower at 0.676%, and the yield on the 30-year Treasury bond was down at 1.415%. This, coupled with the recent soft data releases from the US, exerted broad selling pressure on the dollar, which extended its fall to hit fresh lows against a handful of its peers this morning. As for data releases, Building Permits and Housing Starts for July are released at 13:30, but are unlikely to have any real impact on the markets. Just before that, we have a speech from FED member Lael Brainard; usually a centrist, any comments from her on stimulus or policy could give us an insight on how the FED are preparing to act next.
As a consequence of the greenback’s weakness, EURUSD has started the day strong, currently trading above 1.1890 (09:11). Yesterday, the pair opened the session at 1.1854, and after an uneventful day closed off at 1.1868 – making that the pair’s 5th straight daily gain.
Similarly, the pound has also gained some ground against the dollar, trading this morning above 1.3160 (09:12). Yesterday proved to be a rather flat day of trading for GBPUSD, opening the session at 1.3110, maintaining that level, closed off the session also at 1.3110.
As for GBPEUR, markets sat tight ahead of today’s talks, the pair opened the day at 1.1060, and with little volatility over the session, closed the day at 1.1041. However, it is important to note that this pair could see a lot of price action in the coming weeks given the geo-political risk it now faces because of resuming negotiations.
In early 2016, Mr Johnson, then Mayor of London, persisted that negotiations between Britain and the EU would be easy, with the UK holding most of the cards. Four years down the line and 3 PM’s later, we can say with some certainty that Boris may have been wrong. This morning the 7th round of Brexit negotiations begin, and markets will be following developments (or lack of) very closely.
The UK exited the EU in January but still has until 31st December to agree a deal on its future trade relationship with the European Union. David Frost, Britain’s chief negotiator, said last Thursday that a Brexit agreement can be reached in September. This message was relayed again by the government yesterday.
On the data front, with only a few releases, none of major significance, Tuesday is somewhat of a non-event. Tomorrow however, at 7:00 we have the release of UK Core Inflation, forecasted at 1.3%, and UK Inflation Rate, forecasted at 0.6%. Following this, at 10:00 we have Core Inflation from the Eurozone, looking to improve from last month’s reading of 0.8% - forecast for July stands at 1.2%. Then finally, after a few second-tier readings from the US in the afternoon, we have the latest FOMC Minutes being released at 19:00.