Euro Weakens as German 10-Year Bond Yield Slumps to Record Lows
What’s been happening?
Pound Sterling – UK Markets
The pound sterling closed the choopy trading day virtually unchanged against both the dollar and the euro on Thursday. The lack of macroeconomic data releases from the UK and the holiday in the US kept the trading volume at very low levels.
Earlier in the day, during an interview with Sky News, British Brexit Secretary Barclay said that a no-deal Brexit could cause a recession and supply shortages. "The question is are we doing everything we can to prepare and are we trying to get a deal in the first instance, but if not how do we prepare in a sensible and professional manner? And that is what we're working extremely hard for the government to do," explained. Meanwhile, citing a former Cabinet minister, The Financial Times claimed that the Conservative Party was preparing for a snap election in October, which could take place if Boris Johnson becomes the next PM and fails to deliver Brexit.
US Dollar – US Markets
Independence Day holiday in the U.S.
Euro – European Markets
The only data published by the Eurostat from the euro area on Thursday revealed that retail sales contracted by 0.3% on a monthly basis in May and brought the annual grate down to 1.3% compared to analysts’ estimate of 1.6%. On Friday, Germany’s Destatis reported that manufacturig sales in Germany fell by 2.2% in May.
With the disappointing data ramping up the odds of the European Central Bank cutting rates, the 10-year German Treasury bond yield fell below the ECB’s deposit rate of -0.4% for the first time and weighed on the shared currency, which was posting losses against the dollar and the British pound Friday morning. On Thursday, in an interview with Boersen Zeitung, European Central Bank (ECB) Governing Council member Olli Rehn reiterated that further monetary stimulus was needed until there was an improvement in economic and inflation prospects.
What’s coming up?
UK: There won’t be any macroeconomic data releases from the UK.
US: The U.S. Bureau of Labor Statistics will publish its Nonfarm Payrolls report, which will include average weekly hours, average hourly earnings, unemployment rate, and labour force participation rate.
EU: European Central Bank Governing Council Member De Guindos is scheduled to deliver a speech on Friday.