The FX markets have been reasonably well-behaved despite the raging trade and investment war between the US and its trading partners weighing on US and Asian equity markets, and in particular tech stocks. The Dollar is a tad stronger, with EUR/USD back below 1.17, although broadly unchanged since Friday against a basket of currencies of the United States’ main trading partners.
Harley Davidson announced that it would move some of its US production abroad to avoid EU import tariffs, the French Finance Minister said would Europe would respond should the US impose a 20% tariff on imports of European-made cars and there is some confusion as to what extent the US will seek to restrict foreign (including Chinese) investment into certain US sectors. The newsflow on the issue of US trade and investment policies is coming thick and fast, with officials offering little clear line of sight.
Sterling is broadly stable against the Euro and Dollar ahead of Professor Jonathan Haskel’s testimony before the Treasury Select Committee at 10:00. Haskel will replace Ian McCafferty on the Bank of England’s Monetary Policy Council on 1st September. While little is known of his policy-bias the odds are that the will be less hawkish than McCafferty which could at the margin reduce the probability of the BoE following up an August rate hike with another quick hike.
Ian McCafferty, who has consistently voted for a 25bp rate hike and is unlikely to change his hawkish rhetoric, is due to speak at 10:30. If anything he may step up his hawkishness as he will be stepping down after the August policy meeting. MPC member Haldane joined McCafferty and Saunders last week in voting for a 25bp rate hike but they still need at least two other MPC members to join them for an August hike to become a reality.
