EU Summit Discussion Picks Up Pace Today
Day two of the European Union (EU) leaders’ summit in Brussels will take centre stage today, where they will debate the strategies for a slimmed-down 27-nation bloc, in the absence of the UK Prime Minister, David Cameron. The first day of the summit involved a heated discussion wherein top EU leaders expressed their interest to get rid of Britain as fast as possible and put an end to the Brexit-induced financial and political turmoil.
In the UK, the just out data showed that the nation’s net consumer credit improved more than expected in May. In the Eurozone, the data docket will be highlighted by Germany’s flash consumer price figures for June. Later in the US, pending home sales and weekly mortgage applications data will be released.
Pound Sterling – UK Markets
The Pound is trading higher against its peers this morning after UK’s net consumer credit rose at the fastest annual pace since 2005 in May. Further, mortgage approvals rose above expectations in May. Looking ahead, Britain’s GfK consumer confidence index data is due overnight and is expected to decline further in June.
Yesterday, the battered Sterling posted a sharp recovery against the greenback as market participants digested Britain’s vote last week to leave the EU. Addressing a group of renowned leaders at a dinner speech at the two-day EU Summit in Brussels, the soon-to-be-ex UK Prime Minister, David Cameron, called for a “clear model” of interactions between Britain and the remaining members of the EU bloc. European leaders maintained a hard line stance against Britain and demanded that the nation activate the EU treaty’s voluntary exit clause as soon as possible. In fact, the German Chancellor, Angela Merkel, went one step ahead and warned that Britain will not be able to “cherry-pick” the parts of the EU it wants.
US Dollar – US Markets
The greenback ended on a weaker footing against the Euro and the Pound yesterday, its first drop in the previous three sessions. On the data front, the third and final estimate of US economic growth for the first quarter was not as dire as previously believed to be. Moreover, US consumer confidence snapped a two-month losing streak and advanced to an eight-month high level in June, as consumers expressed faith that the nation’s business and the labour market conditions would improve. However, it needs to be noted that the survey was conducted before Britain voted to leave the EU. Further, US home prices continued rising at a steady clip in April. Separately, the US Fed Governor, Jerome Powell, warned that the Brexit vote has increased risks to an already fragile global economy and might prompt the Fed to adopt a more patient mindset as it considers future interest rate moves.
Going ahead, market participants will look forward to the US pending home sales data for May and weekly mortgage applications data, due later today.
Euro – European Markets
The Euro is trading mixed against the US Dollar and the Pound this morning. Earlier in the session, survey data from market research group GfK showed that its forward-looking consumer sentiment indicator had reached its highest level in almost a year heading into July, as consumers remain optimistic about the economy and their income prospects. Going ahead, the Eurozone consumer confidence and business climate indicators are scheduled for release in a few hours and both are expected to remain steady in June. Later in the day, the preliminary German inflation figure for June is scheduled for release and is expected to post a slight uptick.
Yesterday, at the EU summit in Brussels, after a stormy and ill-tempered debate, the European leaders called on Britain to set the clock ticking “as soon as possible” on the legal process to quit the EU within two years. Meanwhile, speaking at the European Central Bank’s (ECB) annual forum in Sintra, Portugal, the ECB President, Mario Draghi, urged global central banks to increase cooperation and criticised those who try to instigate currency wars.
Other Currencies – Highlights
The Swiss Franc has reversed its previous session losses and is trading higher against the US Dollar this morning. Data released earlier during the session showed that Switzerland’s UBS consumption indicator advanced in May. Going ahead, attention now turns towards US economic releases due later in the day, with the Fed’s personal consumption expenditure price index and pending home sales data, both for the month of May, and the nation’s weekly mortgage applications data all expected to be closely eyed. These releases will have a significant impact on the US Dollar – Swiss Franc currency pair.
Looking further ahead, after a quiet start there are a few important data points in Switzerland towards the end of this week. Market participants will await the release of the alpine nation’s KOF leading indicator, real retail sales and the SVME - purchasing managers’ index data.