What’s been happening?

Pound Sterling – UK Markets 

The Governor of the Bank of England, Mark Carney, is testifying before Parliament’s Treasury Select Committee this morning. Carney is being joined by Sir Dave Ramsden, the Deputy Governor of Markets and Banking, Michael Saunders, a Member of the Monetary Policy Committee and Dr Gertjan Vlieghe, an External Member of the Monetary Policy Committee. Testimony will be given by Carney and the others regarding the decision taken by the Bank’s Monetary Policy Committee to keep interest rates unchanged at 0.5% in May. 

While Carney will be reviewing the latest Quarterly Inflation Report – (the document outlining the near-term policy path), currency markets will be focusing on any insights on the future direction of interest rates. Currently there is an estimated 50% chance of an interest rate rise in 2018.

Today sees negotiators enter another round of Brexit talks in Brussels. While no major breakthrough is expected to come out of the negotiations today, markets will be looking at the development of the Irish border solution, as signs of notable progress are supposed to have been made before the European Council meeting which commences on 28th June.

US Dollar – US Markets

The US Commerce Department on Monday placed heavy import duties on steel products from Vietnam that originated in China, after finding that they evaded US anti-dumping and anti-subsidy orders. The Commerce Department agreed with the claims of American steelmakers that as much as 90% of imported steel value originated from China and not Vietnam. The US customs authorities will collect anti-dumping duties of 199.76% and countervailing duties of 256.44% on imports of cold-rolled steel produced in Vietnam using Chinese-origin substrate, the Commerce Department said in a statement. 

The new duties will come in addition to a 25% tariff on most steel imported into the United States that resulted from Trump government’s “Section 232” national security enquiry into steel and aluminium imports. 

Crude oil prices rose further this morning, with Brent edging closer to $80 per barrel. The US has also toughened its stance on Iran and produced an extensive list of demands, which is likely to further curb the country’s crude oil exports and boost oil prices. Some of the demands for Iran included, completely dropping its nuclear programme and pulling out of the Syrian civil war or face severe economic sanctions. This could reduce Iranian oil exports by 200,000 barrels per day by Q4, Mitsubishi Corporation’s Tony Nunan estimated. 

Euro – European Markets

Both Eurozone and global markets continue to focus on development of the political situation in Italy. Italian bond yields have risen suddenly over the last couple of weeks as talks about a parallel currency in Italy continue. Parallel currencies are currencies that are issued by the state as an official second currency alongside legal tender currency. If faced with an introduction of a parallel currency in Italy, the European Central Bank and the European Union would likely find the situation untenable which may see the Euro fall into a further volatile state. Markets continue to follow the progress. 

What’s coming up? 

UK: Inflation data will be coming out of the UK tomorrow morning. Traders will be looking to see whether prices are moving in a direction consistent with further interest rate rises at the Bank of England. BoE’s Governor Mark Carney will be giving a speech on the Monetary Policy on Thursday.   

US: Global markets will be focusing on the Federal Open Market Committee Minutes taking place tomorrow. 

EU: The preliminary estimates of Eurozone PMIs for Services and Manufacturing across the Eurozone, in the month of May, will be released on Wednesday morning. ECB Monetary Policy Meeting Accounts will be taking place on Thursday morning, followed by a summary of the discussion, in an unattributed form, on the economic and monetary analyses and on the monetary policy stance.