Snapshot – 14th July

14th July 2020

The Dollar is broadly unchanged in today’s session but this masks a degree of granularity within major currencies. While the Euro has continued to inch higher, the Australian Dollar has treaded water while Sterling and the Kiwi Dollar have lost ground.

The Euro, in trade-weighted terms, had been in remarkably narrow 5-week range of only 1%, but has appreciated 1% in the past four sessions to its strongest level since end-March. The other interpretation is that the Euro has resumed a very slow up-trend (punctuated by regular ups and downs) which started in early May. Markets are seemingly confident that the EU will reach an agreement, at its Summit on 17-18 July, on a €750bn recovery fund despite
some EU leaders still showing some scepticism.

Markets were seemingly left unimpressed with the modest rebound in UK GDP in May from a very low base, with GB/USD down 0.3% from yesterday and GBP/EUR falling below 1.10 for the first time this month. UK GDP rose 1.8% mom but this came on the back of a record 20.3% momcontraction in April and was lower than the consensus forecast. While UK GDP
growth likely accelerated in June, based on the jump in the Composite PMI to 47.7 from 30.0 in May, the UK is still on track to post a record-contraction in Q2 which could near 20% qoq. Moreover, the Office of Budget Responsibility has stepped up its warning that the government’s ballooning fiscal spending was not sustainable, irrespective of how it was financed, and that the surge in public debt (already above 100% of GDP) was storing
problems for the future.