The ECB and BoE are actively talking more amid pressure to decouple their markets' borrowing costs from the upward pull of US yields, which have risen on the back of the Fed tapering its QE programme.

Tom Tong18/Jul/2013Currency Updates


The pound rallied yesterday following the release of Bank of England’s monetary policy committee meeting minutes. Policy makers voted 9-0 in favour of retaining the current level of quantitative easing and saw sterling breach two-week highs versus the dollar, and gilt futures tumble having traded flatly shortly before the release.

The July meeting was the first to be chaired by new Governor Mark Carney, and after two members of the MPC having voted to expand the bond-buying programme at the previous meeting, the unanimous vote illustrated a willingness to explore alternative options moving forward.

Additionally, the Office for National Statistics released the Claimant Count Change for June yesterday which reduced by 21,200, better than the forecasted 7,500.

Today sees the release of last month’s Retail Sales figures (m/m) which analysts are expecting to show a change of 0.2%, compared to 2.1% the previous month.


Data releases were light on the ground yesterday with Construction Output coming in at -0.3% from a previous figure of 1.0% MoM, and will continue in the same light today with Current Account figures expected to creep up from €19.5B to €20B.

The parliament in Greece has narrowly approved a public sector reform bill that will see thousands of people lose their jobs. MPs backed the bill tied to the country’s fresh €6.8bn of bailout loans which are required to keep Greece afloat. Job cuts will affect more than 4,000 state employees in the short term but that figure is expected to rise to 11,000 by the end of 2014. Greece has an unemployment rate of 27%.

Despite all of the measures which the Greek Government are taking following the debt crisis, there is still a sense of unsustainability, and we expect another debate about writing off another chunk of debt which will impact the other EU countries who have lent huge amounts to Greece.

Euro Stoxx closed yesterday at 2,681.88


As predicted all eyes yesterday were focused on Federal Reserve Chairman Ben Bernanke’s comments. His comments continued the theme that the Fed would be the first major central bank to move away from quantitative easing. The plan is still to taper back the bond buying programme later this year with a view to ending it in the middle of 2014. However he left open the option to amend the timing dependent upon the economic outlook, and specifically achieving a growth rate of between 2.3% and 2.6&

Bernanke also reiterated that the world’s largest economy could still be hampered by over aggressive Federal Budget Cuts and the slowing growth of its trading partners overseas.

This caused the Dollar to strengthen against most major currencies, retracing the earlier losses from a three week low.

One negative bit of data out of the states was the unexpected drop in the Housing Starts and Permits for June.

Today attention will be on Bernanke’s speech to the Senate Banking Committee, however it is highly unlikely that there will be any changes from his comments to the House of Financial Services Committee. We also have the Philadelphia Fed Manufacturing Survey, the consensus is for a drop from the previous level of 12.5.


Written by Tom Tong

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