IFX Market Report
Friday 23rd June 2017

Market Report

It is a year ago since the EU referendum and a lot of water has passed under the bridge. In the hours after announcement the pound plummeted 11% and despite showing some signs of improvement periodically, has never really recovered. In fact, with political and economic uncertainty more recently, the pound trades 15% lower now than the evening of the 23rd June 2016 when GBPUSD was at 1.50.

There have been many debates over Brexit since then, whether it will go ahead or not, be hard or soft and recently with Conservatives losing an overall majority in the House of Commons the debate continues with ferocity. However, the facts are the two main political parties in the UK have backed the separation, going along with the voice of the nation, so it is likely the split, in one form or another will happen.

Negotiations over the terms of the UK’s separation with the European Union have begun in Brussels and Theresa May told EU leaders over dinner yesterday that EU citizens living in the UK for last 5 years (at a specific date) will be granted UK settled status. In return the Prime Minister has asked for a reciprocal offer for UK citizens living in Europe.

So far the reaction from EU leaders to the UK’s requests and suggestions has been mildly positive and the pound has risen this morning on the back of optimism that the summit may not be the disaster some were expecting. GBPUSD has traded as high at 1.2742 this morning and GBPEUR hit 1.1405.

Worldwide News

Eurozone's consumer confidence index data released yesterday was better than expected. This month the index rose to -1.3 from -3.3 in May, above market expectations of -3. This was its highest reading since April 2001.

Initial Jobless Claims in the US rose slightly this week hitting 241k from last week’s 238k, but the markets had anticipated a rise to 240k, so wasn’t viewed too negatively. This marks 120 weeks under the 300k level, the longest stretch since 1970.

EURUSD traded within a very narrow band throughout yesterday, opening at high of 1.1176 gradually working down to a low of the day of 1.1147.

European Union leaders reached a political deal Thursday to extend the bloc's economic sanctions on Russia by a further six months, citing the failure of Russia to end the conflict in eastern Ukraine. The decision, which was widely expected, will be formally approved in coming days, likely early next week. It means the sanctions, which were due to expire at the end of July, 2017, will now continue until at least January 2018.

Canadian Retail Sales were better than expected coming in at 0.8%, up on the previous month of 0.5% and expectations of 0.3%. The data was well received by investors, GBPCAD traded at 1.6869 before the announcement and fell to a low of 1.6744.

Data released this morning showed Eurozone Services and Composite PMI figures fairly to reach consensus at 54.7 and 55.7 respectively. The Manufacturing PMI figure did beat expectations at 57.3 from last month’s 57.0. EURUSD, still trading in a narrow band rose 15 pips to hit a high of 1.1185, currently is trading at 1.1166.