GBP/EUR remains unchanged around the 1.14 level with markets seemingly reluctant to (re) build long Euro or Sterling positions given the background of soft Eurozone and UK economic growth and uncertainty due to Brexit and the newly formed Italian government. GDP growth in the UK was confirmed at 0.1% qoq, with the 0.2% contraction in business investment and -2.7% fall in construction output weighing on the headline figure. This will make uncomfortable reading for Prime Minister Theresa May’s government even if markets may ultimately be more interested in how the UK economy has so far fared in Q2.
The Dollar is again broadly unchanged today, with gains in early trading quickly reversed. US President Trump’s decision to cancel his planned meeting with North Korean leader Kim Jong Un will not have helped. But more fundamentally market seems far more confident that the Federal Reserve will hike rates only twice more this year which may have increased the probability that Dollar flat-lines in coming weeks.
The Swiss Franc has given back some of yesterday’s robust gains but remains near a 2-month high in trade-weighted terms. The currency’s appreciation seems to have more to do with markets finding value in a Swiss Franc which typically outperforms during periods of global uncertainty than with central bank policy or Swiss macro data.
