21 Aug 2017

Market Brief: Musical chairs at the White House

Shaun Garrett

Dealing team

On Friday afternoon the USD pared losses after markets took news of Senior White House adviser Steve Bannon’s dismissal as a positive development. 

Latest rates   Today's data release
GBP/USD GBP/EUR GBP/AUD GBP/AUD GBP/CHF 00:01 UK House Rightmove price index
1.2856 1.0952 1.6232 1.6195 1.2418
GBP/JPY GBP/HKD GBP/ZAR EUR/USD EUR/GBP 13:30 US Chicago Fed national activity index
140.17 10.0571 16.9786 1.1738 0.9131
Investec currency forecasts as at 27 July 2017 Key levels
  Q3 '17 Q4 '17 Q1 '18 Q2 '18 Support Resistance
GBP/USD
1.29 1.30 1.30 1.31 1.2818 1.2937
GBP/EUR 1.13 1.14 1.13 1.13 1.0934 1.1005
market brief daily chart
Market overview

GBP/USD reached 1.2840 just after the news of Bannon's departure hit. Bannon was known to be an advocate for protectionism and a trade confrontation with China.

From the UK, Brexit negotiations will be back to the front of people's minds this week as the UK is set to lay out its position in at least three areas of negotiation with the European Union. As a side note the Rightmove UK house price index was released just after the strike of midnight showing a slight tick up in asking prices on a year-over-year basis, to 3.1% YoY for August against a 2.8% July increase. In Germany chancellor Angela Merkel has defended her handling of Germany’s refugee crisis and said she’ll serve a full four years if re-elected in September, as her main opponent steps up his campaign to unseat her.

The most excitement lies in the US with more White House changes. Donald Trump’s controversial Chief strategist Steve Bannon was fired on Friday afternoon (although he officially left his post by mutual consent). Some reports suggest that the move came after an interview in which Bannon undermined the administration’s line on North Korea, but of course this follows a number of weeks of a very public power struggle between the so-called ‘economic nationalists’ and the ‘grown ups’ in policymaking circles. The S&P 500 index rallied temporarily on the news of Bannon’s departure, but ended down 0.2% on the day. Whether this ends the period of musical chairs at the White House remains to be seen. Some reports suggest National Economic Council Chief Gary Cohn is still considering his position, following the President’s seemingly equivocal position on the violence at Charlottesville a week ago. Meanwhile Treasury Secretary Steve Mnuchin came under pressure from a number of his fellow alumni from Yale University to resign his post, although he insisted on Saturday that he would remain in office.

The day ahead

The beginning of the week is light on the data front with the only stand out from US in the afternoon, Chicago Fed National activity index at 1.30pm. The Jackson Hole symposium begins Thursday when UK GDP second estimate figures are also released. As such it may be that we will have to wait until Thursday to see some greater volatility in FX markets.

Thought of the day

Today sees what is being dubbed as the “Great American Eclipse” – dramatic but probably fitting for what is a once in a lifetime event when the whole of North America witnesses an eclipse of the sun. The blackout, or “totality”, will last for over two minutes for those directly in its path. Many towns in the path of the eclipse are expecting huge influxes of visitors as sky watchers wait until the last possible moment to decide where the clearest skies will be. A solar eclipse is when the Moon passes between Earth and the sun, totally obscuring the image of the sun for a viewer on Earth. Similar to how political and economic issues can obscure your view of future FX rate movements. If you don’t want to experience a blackout of your FX cover, give your Investec dealer a call today on 0800 055 6339!

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