Trumponomics reign supreme

The sun continues to shine bright here in London, as our foreign exchange specialists continue to bring you what's most pressing in the markets today. Iran, The Fed, The FBI, China, Russia - It’s no picnic being Trump!

GBP

Sterling is trading little changed, at around lower mid 1.3100s against the US Dollar and just above 1.1200 against the Euro, as Trump’s anti-Fed policy verbal intervention from last Friday carried over into this week, ignoring the mounting Brexit risks.

GBPUSD jumped back above the 1.3100 handle and continued gaining positive traction this morning. Traders even shrugged off a bearish knockback, wherein the EU leaders rejected the UK's current Brexit plan, with the USD price dynamics turning out to be an exclusive driver of GBP’s momentum.

Brexit Secretary Raab stated to Andrew Marr that a deal could be done by October, a statement not backed up by the Government, however Raab then created a certain amount of uncertainty when he said that if there was no deal, then Britain’s exit from the EU would not be concluded.

It's going to be a quiet Monday on the economic calendar, with only a speech from the Bank of England's (BoE) Chief Economist, Andy Haldane due after trading hours, at 6pm, with the rest of the week looking equally inconsequential.

EUR

Initial concerns over Italian politics were eased when the rumours that there was internal fighting amongst Economy Ministers was disproved. The EUR rallied slightly on the news that Trump had attacked Fed monetary policy, specifically the rate hiking cycle, which led to German yields moving higher and a general resistance to fresh lows. 

European Union leaders in Brussels flat-out rejected UK Prime Minister Theresa May's latest "third option" Brexit proposal. Under the proposal, the City of London would have enjoyed permanent access to European financial markets, which would rob the EU of decision-making autonomy, as market access to EU-wide markets is a privilege that the broader EU holds the right to rescind at any time.

With the latest hotly-debated Brexit proposal now dead in the water with European leaders, Brexiteers are back to the drawing board as PM May struggles to find an acceptable common ground between hard-line Eurosceptics in the UK's parliament, and the keyholders of the European Union, who have little need to make concessions to the UK's demands.

EUR USD will likely be driven by data and the ECB meeting on Thursday, although we expect little change in the policy guidance from the ECB.

USD

Friday saw the Greenback relinquish gains made over the course of last week. Markets showed a panicked reaction, fearing for the independence of the Federal Reserve (FED) after comments by President Donald Trump. Trumponomics believes in, and prefers, a weaker Dollar with low rates to stimulate the economy (please ignore previous contradictory tweets).

Trump seems increasingly keen on taking on the EU and China and it seems more evident that the US-China trade war is here to stay for some time. In an interview with CNBC, Trump said that he was prepared to put tariffs on all $505 billion in Chinese goods imported to the US. This along with criticism of the Fed's monetary tightening triggered US Dollar selling. Also, emerging news reveals a growing spat with Iran, mainly based on oil, which has already descended to mentions of war.

Although US Treasury Secretary Mnuchin reaffirmed Trump’s full support for central bank autonomy with no interest in interfering in foreign exchange markets at the G20 meeting in Buenos Aires, no action was taken on data.

Today sees a thin economic docket, featuring the release of existing home sales data from the US, as well as the Chicago Fed National Activity Index.

Today's data:13:30   USD Chicago Fed National Activity Index (Jun)15:00   USD Existing Home Sales (MoM) (Jun)18:00   GBP MPC Member Broadbent Speech