OANDA Market Insights podcast (episode 23)

OANDA Senior Market Analyst Craig Erlam reviews the week’s business and market news with Jazz FM Business Breakfast presenter Jonny Hart.

This week’s big stories: Trump NATO summit meltdown, Tory big beasts depart Cabinet, PM May defends Brexit white paper, Bank of Canada raises interest rates and the ECB releases the minutes from its June meeting.

Trade war and Trump European trip boost US dollar

GBP/USD – British pound slips over white paper blues

What sparked the dollar rally ? ( OANDA Trading Podcast on Money FM 89.3)

Markets higher as earnings season gets underway

Earnings season eyed as trade war fears remain

We’re seeing some risk appetite return on Friday even as concerns about trade remain front and centre and shows no signs of improving.

European equity markets are trading in the green on Friday, taking the lead from the US session on Thursday where tech stocks drove a rally that saw the NASDAQ hit a record high. With earnings season getting underway, investors will be looking for reasons to be more optimistic having spent months reading about the risks that a trade war poses to the economy.

JP Morgan, Citigroup and Wells Fargo will kick things off today and over the coming weeks, investors will be paying close attention not just to the results but also references to trade tariffs and the impact they are expected to have on future results, particularly those that have already been targeted in counter-measures taken or proposed against the US.

DAX steady as investors search for cues

Sterling slips as Trump warns of risks to US/UK trade deal

Trump has very much been in the spotlight this week, attending the NATO summit in Brussels before heading over to the UK to meet Prime Minister Theresa May. As ever, Trump was not afraid to express his views on the UK and Brexit ahead of the visit, warning that a trade deal with the US would not be possible under the model that May is seeking with the European Union, while also expressing his belief that Boris Johnson would make a good PM. This appears to have weighed on the pound in trade on Friday given the complications it could cause May and her team.

None of this will go down well with May – who has previously pushed strongly for this visit despite much protest – and comes at a terrible time for her but as Trump well knows, she is in a very weak position right now and is unlikely to fight back and, more importantly, he wants a Brexit that best suits the US. Whether Trump’s comments give more voice to dissenters among Brexiteers is yet to be seen but it certainly doesn’t help the PM as a trade deal with the US has long been touted as one of the benefits of leaving the EU.

First signs of tariffs impact in China’s June trade numbers

Chinese trade surplus increases as Trump plans more tariffs

Chinese trade data released overnight may be used as a source for Trump’s next attack on the world’s second largest economy, with exports having soared once again – rising 11.3% – increasing the surplus the country has with the US to $41.61 billion in June. While the main reason for such a spike is likely to be exporters front loading sales ahead of the tariffs being implemented, it’s likely that a stronger US economy and weaker yuan is also playing a role.

I expect this will be used as another example of the bad trade policies that Trump has repeatedly references but been unable to so far influence. Trump is attempting to force them back to the table with threats of another $200 billion in tariffs, something that has so far only been met with retaliation from China and others.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

Live FX Market Analysis – 10 July 2018 (Video)

In this week’s webinar, Senior Market Analyst Craig Erlam discussed the latest Brexit developments as two members of her team resign after an apparently united and productive meeting on Friday. He also talks Trump, after the latest imposition of trade tariffs and ahead of his trip to the UK and the NATO summit, and previews the week ahead.

Craig also gives his live analysis on EURUSD (12:20), GBPUSD (15:03), EURGBP (17:50), AUDUSD (19:35), USDCAD (24:12), GBPCAD (26:19), NZDUSD (28:31), USDJPY (30:22), GBPJPY (32:25) and EURJPY (34:52).

GBP/USD – British pound steady on modest GDP growth

USD/JPY – Japanese yen dips to 7-week low, inflation reports next

Commodities Weekly: Gold saved by dollar’s retracement

What does Davis resigning mean?

The resignation of a key driver of the U.K.’s Brexit process is a blow for British Prime Minister Theresa May, but analysts believe she can survive the departure.

Brexit Secretary David Davis resigned Sunday evening, objecting to May’s withdrawal plan that seeks to maintain close economic ties with the European Union (EU), rather than a harder separation favored by Davis and other so-called “Brexiteers.” Former Housing Minister Dominic Raab was named as Davis’ successor on Monday morning.

Analysts are seeing the latest move as a “crunch point” for May, but that the vagaries of British politics and need for leadership just nine months before the official Brexit date could mean that she can soldier on.

CNBC

May Faces Difficulties Keeping Cabinet United Over Brexit

Theresa May is braced for her Cabinet to split when the European Union rejects her demands for a sweeping free trade deal, after her senior team agreed to put off the hardest Brexit decisions until later.Despite the Cabinet truce after months of internal division, three senior government officials said May will face her most challenging task keeping her ministers united when — as they expect — EU leaders formally reject the British approach.The U.K. prime minister won the backing of her ministers to ask the EU for the most ambitious and wide-ranging trade agreement the bloc has ever signed, after a marathon eight-hour meeting at her country house on Thursday.

Source: May Knows Danger of Cabinet Split on Brexit Still Lies Ahead – Bloomberg

DAX Edges Lower as German GDP Slows in Q4

24 hours of reconciliation

50 50 Chance of Halting Brexit

Opponents of Britain’s exit from the European Union are preparing a major campaign they say now has close to a 50:50 chance of stopping Brexit by blocking Prime Minister Theresa May’s divorce deal, a leading pro-EU campaigner said.With Britain scheduled to leave the EU in March 2019, opponents of Brexit are exploring various ways to stop what they say is Britain’s biggest mistake since World War Two.‘Best for Britain’, a campaign group which received a 400,000 pound donation from billionaire financier George Soros last year, hopes to convince lawmakers in the 650-seat parliament to block the withdrawal deal May aims to bring back from Brussels in October.

Source: Chance of halting Brexit now close to 50:50, says leading campaigner – Reuters

DAX Edges Lower as German GDP Slows in Q4

24 hours of reconciliation

UK Growth Revised Lower

The UK economy expanded by less than previously thought in the last three months of 2017, official figures say.GDP grew by 0.4% in the October-to-December period, the Office for National Statistics (ONS) said, down from the initial estimate of 0.5%.The revision was due to slower growth in production industries, the ONS said.In 2017 as a whole, the economy grew by 1.7%, also slightly lower than previously thought and the weakest since 2012.

Source: UK economic growth revised downwards – BBC News

Futures Flat After Hawkish Fed Minutes

Dollar maintains its firmer tone

GBP/JPY – Bearish Breakout Ahead of Jobs Data and BoE

OANDA Senior Market Analyst Craig Erlam talks to Core Finance about the recent bearish break in GBPJPY and whether it signals more pain ahead. He also previews the UK jobs data and Bank of England inflation report hearing and what they could mean for interest rates this year.

USD/JPY – Japanese Yen Edges Lower as Japanese Manufacturing PMI Dips

BoE Hearing and Fed Minutes in Focus

DAX Under Pressure, Investors Eye Fed Minutes

BoE Hearing and Fed Minutes in Focus

US Futures Continue to Pare Last Week’s Gains

US equity markets are expected to open in the red again on Wednesday, tracking losses in Europe as stocks continue to pare last week’s strong rebound.

It’s been a relatively quiet start to the morning and the week, with the bank holiday in the US and Canada contributing to this. The European session has been dominated by economic data releases so far and that’s likely to continue, with flash manufacturing and services data due from the US shortly after the open. It’s the FOMC minutes that will be released later in the day though that will likely be the standout event from a US perspective, particularly as the statement caused quite a stir at the end of January.

US Yield Curve Now (Orange) and on 29 January 2018 (Purple)

Source – Thomson Reuters Eikon

The sell-off in the markets may have come a couple of days later but part of the initial trigger was a more hawkish sounding Fed, with the jobs report then being the straw that broke the camel’s back two days later. While the minutes may not generate quite the same response, traders will likely monitor what they say very closely for signs that policy makers are now leaning more towards three to four rate hikes this year, rather than two or three.

EUR/USD – Euro Ticks Lower as German Manufacturing PMI Softens

GBP Slips as Unemployment Ticks Higher

Sterling is coming under a bit of pressure this morning after UK jobs data for the three months to December showed wages still growing at a moderate pace and unemployment ticking up to 4.4%. While a higher reading on wage growth may have triggered a more bullish response from the pound, the data turned out to be quite insignificant as it’s unlikely to change the views at the Bank of England.

UK Unemployment Rate

Wages have been slowly ticking higher recently and they could continue to do so as workers demand more due to the higher cost of living and a tight labour market. The move higher in the unemployment rate won’t be a concern at this moment with it potentially being a one-off move and still very low. As long as inflation remains at upper range of what is deemed acceptable, the central bank seems intent on raising rates at least once more this year, despite the temporary factors driving it and economic uncertainty that lies ahead.

Yield-o-Mania

BoE Inflation Report Hearing Eyed as Markets Price in Rate Hikes

Members of the Monetary Policy Committee including Governor Mark Carney will appear before the Treasury Select Committee later on today, during which they will be questioned on their latest inflation report forecasts and expectations for interest rates going forward. While it’s always interesting to get the views of policy makers and the pound will likely be volatile throughout, I wonder how much of what they have to say will now already be priced in, with at least one rate hike now expected this year.

GBPUSD Daily Chart

OANDA fxTrade Advanced Charting Platform

With that in mind and with Brexit transition negotiations likely to dominate the next month, we could see the pound lose some of the momentum that’s been gathering over the last six months or so. It’s recent failed to make new highs on two occasions against the dollar and it’s also slipping against the yen in a possible sign that traders are beginning to lock in profits ahead of what could be a difficult month.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

FX Market Analysis – 20 February 2018 (Video)

Senior Market Analyst Craig Erlam discusses this week’s key event risks, with the most notable being the UK jobs report and BoE inflation report hearing.

Craig also gives his live analysis on EURUSD (11:04), GBPUSD (15:13), EURGBP (17:04), AUDUSD (18:36), USDCAD (20:02), GBPCAD (22:01), NZDUSD (24:47), USDJPY (25:44), GBPJPY (26:47) and EURJPY (28:24).

USD/JPY – Dollar Punches Above 107 Yen, Fed Minutes Ahead

Higher Yields Pushing Dollar Up

Intermezzo