Market Brief: Football's coming home

Following the Cabinet meeting, Downing Street stated that it plans to publish the Brexit white paper on Thursday as originally planned.

Today's data releases Key levels
13:30 US PPI  
15:00 US wholesale trade sales Support
Resistance
15:00 US wholesale inventories GBP/USD 1.3200
1.3360
16:35 UK BoE Governor Mark Carney speaks GBP/EUR 1.1250
1.1350
Today's data releases Key levels
13:30 US PPI  
15:00 US wholesale trade sales Support
Resistance
15:00 US wholesale inventories GBP/USD 1.3200
1.3360
16:35 UK BoE Governor Mark Carney speaks GBP/EUR 1.1250
1.1350

Market overview

Good morning everyone. As I type, renditions of “It’s coming home” are blaring from mobile phones across the trading floor! There is certainly a sense of excitement in our office, however it’s time for me to get this commentary written, so I will promise not to get distracted.
 
We had some mixed messages out of the UK Government yesterday. Following the Cabinet meeting, Downing Street stated that it plans to publish the Brexit white paper on Thursday as originally planned. Numerous news sources had reported that it had been delayed until next week following the resignations of Davis and Johnson. However, later in the evening it was reported that two of the UK Conservative Party Vice Chairs had quit over PM May’s Brexit proposals.
 
US-China tit-for-tat tariffs are back in the headlines. In an escalation of the trade dispute between Washington and Beijing, US President Donald Trump has instructed US trade representative (USTR) Robert Lighthizer to begin preparing tariffs of 10% on a further $200bn of imports from China. The administration has released a list of goods that would be affected by the tariffs, which includes a number of consumer items such as furniture, handbags, pet food and bicycles. A public notice and comment process has now kicked off and is set to run through to August, with hearings held from  August 20 to 23. Subsequently, the USTR would be able to impose any potential tariffs as early as September. China’s commerce ministry responded by saying it was “shocked” by the latest US threats and would complain to the World Trade Organisation. Though it has yet to say how it would retaliate, it has previously matched US tariffs on a like-for-like basis. The US announcement came after Wall Street had closed, though Asian equities are weaker across the board this morning, led by the Shanghai composite which has been trading down since the open. Additionally, S&P 500 futures point to the index opening 0.9% lower.
 
The ONS published its first monthly GDP estimate yesterday with the latest reading up to May 2018. This showed that over the three months to May, GDP had risen by 0.2% whilst on a month on-month basis, the improvement was 0.3%. Both of those outturns matched consensus expectations and our own forecast. However sterling was left disappointed, with the 0.2% 3m/3m reading unchanged from the lacklustre 0.2% first quarter growth rate and with the manufacturing sector still struggling for momentum. The detail shows a picture of mixed fortunes with service sector output expanding by 0.4% over the three months to May whilst industrial production fell by 0.6% over the period. Construction output shrunk by a hefty 1.7% 3m/3m and agricultural output was 0.6% lower. 

The day ahead

As mentioned above, the main event today is obviously the England vs. Croatia match for a place in the World Cup final. Make sure you get your trades in early as the build up starts at 6pm, with kick-off at 7pm. Away from football news, there are no releases of note in Europe while in the US the most significant release is the June PPI report, May wholesale trades sales and final May wholesale inventories are also due. Away from the data, BoE Governor Mark Carney will speak late in the afternoon on the global financial crisis at a conference in Boston while New York Fed President John Williams will speak to business and community leaders at an event in Brooklyn. Over at the ECB, Draghi, Praet, Mersch and Nouy will speak in Frankfurt. That leaves me with just one last thing to say – it’s coming home!

Thought of the day

Welcome to the biggest day of my life. Born in the summer of 1990, I just missed the last time England reached the world cup semi-final at Italia 90, and although Gazza’s England went on to lose that day the tournament is still considered a defining moment in English footballing history. This evening we have the chance to go one step further. Taking on Croatia, a team considered the underdogs ranked 12th in the world but who lit up the group stages with a 3-0 win over Argentina before overcoming two penalty shootouts, they will surely be England’s toughest opponent yet. The stand out difference between the two teams is the sheer contrast in experience at major tournaments. Thirteen of the Croatian players are appearing at their second successive World Cup, while 18 of England's 23-man party are at the tournament for the first time. That being said, England will take confidence in the fact  that three out of the four goals the Croats have conceded at the tournament have been from set pieces, while eight of England's 11 goals have been scored via set-pieces - the most in a single World Cup since Portugal in 1966. Armed with these kind of stats I am predicting a cagey affair with England going on to win 1-nil thanks to a second half Harry Kane goal. I will be heading over to Hyde Park to enjoy the occasion with 30,000 other England fans but whether you watch it at home or in the pub, with friends or with family, have a good one and remember…. It’s coming home!

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