Barnier Warns Against No Brexit Deal
Michel Barnier, the European Union’s chief Brexit negotiator, warned Britain that, after it leaves the EU, frictionless trade won’t be possible. Barnier delivered a speech in Brussels, in which he said that he is unsure whether British politicians have fully understood the EU’s refusal to grant single market access to the UK. The French negotiator noted that there is not so much time for the Brexit negotiations and added that “a fair deal is better than no deal.”
Donald Trump is visiting Europe for the second time, being today in Warsaw with everyone waiting to listen to his plans about the relationships between the EU and the US in the future. President Trump will travel later in the day to Hamburg, Germany where he will participate in the G20 world summit.
Pound Sterling – UK Markets
Today, Sterling strengthened against the US Dollar, but dropped against the Euro. The Pound to US Dollar exchange rate was set at $1.29. One Sterling equals to €1.13.
JP Morgan’s economists suggested that the latest UK PMI survey by IHS Markit “pours cold water” on the hypothesis that the Bank of England (BoE) is considering lifting its interest rates. They note that data indicating a weakening and underperforming British economy comes in stark contrast with the considerable strengthening of the Eurozone’s economy.
According to the latest data released, productivity which has been the biggest economic problem in Britain over the last ten years, fell in the first quarter of 2017, recording the first decline since 2015. Economists at the Chartered Institute of Personnel and Development suggested that people’s wages and living standards are going to continue to fall, unless more is done to tackle the nation’s low productivity.
US Dollar – US Markets
The US Dollar fell against the Euro with the exchange rate set at €0.88. The Federal Open Market Committee’s (FOMC) June meeting minutes revealed that the Fed’s policymakers are split on the outlook for inflation and how it can affect future interest rate hikes.
The FOMC minutes also revealed that several policymakers wanted to announce the start of the balance sheet’s adjustment within “a couple of months”, while others wanted to wait until later in the year. With the exception of one, most of the Fed’s policymakers supported the decision of lifting the Fed’s benchmark interest rate. Nomura and HSBC analysts suggest that the FOMC will announce the start of disinvestment in September and expect another rate hike in December.
Donald Trump is in Poland today and he will be delivering a speech in the capital Warsaw, in which he will lay out his vision for the future US-EU relationships. Trump is visiting Europe in order to participate in the G20 summit of world leaders in Hamburg, Germany. President Trump will also take part in the Three Seas meeting, which aims to bring closer twelve countries from the Baltic, the Adriatic and the Black Sea.
Euro – European Markets
The Euro gained some ground against the US Dollar, trading at $1.13. The absence of significant economic data releases brings into focus the release of the account of the ECB’s June meeting.
Investors will be searching for pieces of interesting information in the account of the meeting during which the ECB seemed to change its forward guidance on monetary policy rates. However, Danske Bank analysts suggest that perhaps clues will be outdated because of the ECB president Mario Draghi’s recent speeches. Furthermore, the ECB’s board members Jens Weidmann and Ewald Nowotny, will deliver speeches on the future of the single market currency later in the afternoon.
The Governor of the Bank of France and ECB’s governing member, Francois Villeroy, said that France, and Europe in general, are experiencing a favourable financial period. He suggested that France should seize the moment to make the reforms that will help the economy evolve. Villeroy commented on the ECB’s monetary policy outlook saying that nominal interest rates are set to rise in line with the Eurozone’s recovery.
Other Currencies – Highlights
Sterling edged up to the Australian Dollar at 1.70 AUD. The Australian Bureau of Statistics (ABS) published a report which shows that Australia’s trade surplus rebounded in May. The recorded surplus amounted to A$2.5bn, exceeding all expectations. Coal exports jumped 62% as shipments resumed after Cyclone Debbie disrupted production in Queensland, which is one of the world’s biggest coal-exporting regions.
The Pound surged to the New Zealand Dollar, trading at 1.77 NZD. The government budget surplus was announced, beating expectations. Treasury figures showed that the surplus, for the 11 months to the end of May, was $4.5bn. The forecast had been $2.9bn. Finance minister, Steven Joyce, said that the surplus will be used to finance the government’s $32.5bn infrastructure programme.