31 May 2020

Market Brief: a week of important speeches

Kiran Russell

Dealing team

It is believed that the Prime Minister oversaw proceedings at her Brexit Cabinet meeting at Chequers confidently, whilst getting agreement on a deal. 

Today's data releases
  Key levels
13:00 BoE's Cunliffe speaks    
13:00 US Fed's Bullard speaks   Support Resistance
14:00 ECB's Draghi speaks GBP/USD 1.3857 1.4145
15:00 New home sales GBP/EUR 1.1256 1.1508
Market overview

There was some positive Brexit news over the weekend – with regards to the Brexit Cabinet meeting held at Chequers last week - it is believed that the Prime Minister oversaw proceedings confidently, whilst getting her Brexit War Cabinet to agree to a deal. Whether or not she can get the rest of her cabinet to agree is another thing, but the market took kindly to the news with the Pound firmer over the weekend. The move higher in Cable, and GBPEUR, could also in part be explained by reports that the Bank of England’s deputy Governor Sir Dave Ramsden, one of the most dovish rate setters, was quoted in an interview with the Sunday Times saying “Relative to where I was, I see the case for rates rising somewhat sooner rather than somewhat later.”

 

Turning our attention stateside, after the hawkish FOMC minutes for January suggested the Fed may raise rates faster that the December Fed ‘dot plot’ (3 hikes in 2018), this week all eyes will be on Jerome Powell. The new Fed Chair will be busy making a few appearances this week. The first leg of Fed Chair Jerome Powell’s monetary policy testimony will be to the House Financial Services Committee. This has been brought forward a day, which means we should get an early release of his transcript at 13.30 tomorrow, before he formally speaks at 15:00. As far as we know, the second leg of his hearing, to the Senate Banking Committee is still scheduled for Thursday at 15.00. Mr Powell has kept his cards very close to his chest with regards to policy setting, therefore he could use these hearings as a platform to bridge rate expectations before his first FOMC meeting on March 20-21. To remind you Jerome Powell was appointed Fed Chair on the 5th Feb, on monetary policy he is believed by some to be slightly more of a monetary dove, although the general consensus is that he that he will likely follow a very similar line on policy to his predecessor Janet Yellen. Jerome Powell is a former investment banker estimated to be worth $112 million, which would make him the richest Fed member. In other news stateside, keep an eye out for the second estimate of GDP for Q4 on Wednesday followed by the PCE inflation figures and ISM index on Thursday.

 

Back at home, Theresa May is set to deliver her third major Brexit speech on Friday, after meeting Donald Tusk on Thursday. Meanwhile today, Jeremy Corbyn is expected to convey the Labour Party’s vision on Brexit. BoE’s John Cunliffe will also be speaking today on monetary policy and given he dissented against a November hike, it will be interesting to see whether he has changed his tune in light of the hawkish testimony to the treasury select committee, by Governor Carney and other MPC members. Data-wise we have GfK consumer confidence numbers out on Wednesday as well as Mortgage data (Thursday), with further housing market colour coming from Nationwide on house prices too.

 

In Europe it’s a big week for politics - in Germany today the CDU convention will vote on the SPD coalition and various party positions. Yesterday, in her bid to form a new government, German Chancellor Angela Merkel tapped a young rival, some old allies and a cast of moderates for what would be her fourth cabinet. Merkel said she had tried to strike a balance between experience and youthful energy in making her picks. Last but not least it is worth keeping an eye on developments in Italy too this week. Whilst thus far this has not really been a big market driver, we have the Italian elections on Sunday (4th March). Finally there will not be a US Non-farm payrolls number on Friday this week. Non-farm Payrolls usually get released on the first Friday of the month, however this has been pushed back to March 9th. 

 

Thought of the day

As the resident Scot on the Dealing desk it would be remiss of me not to do a thought of the day and bask in the glory of Scotland’s victory over England in the Six Nations on Saturday! After a very disappointing start to their campaign against Wales, Scotland managed to turn on the style at Murrayfield and win the Calcutta Cup for the first time in 10 years. Before the game, few would have predicted Scotland winning 25-13 and scoring 3 tries in the process but that is the joy and unpredictability of sport! If you find that unpredictability in the FX markets doesn’t give you quite so much joy, give your Investec Dealer a call today and we look at how we can manage your FX exposure and provide some certainty for you.

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