Mild Bid for the Buck, But FX Levels Hold

Market Drivers July 10, 2018
UK and GE data misses
Dollar finds bid
Nikkei 0.66% Dax 0.04%
Oil $74/bbl
Gold $1253/oz.
Bitcoin $6500

Europe and Asia:
GBP UK GDP 0.3%
GBP UK Trade Balance -12.B vs. -12B
GBP UK MP 0.4% vs. 0.9%
EUR GE ZEW -24.7 vs. -18

North America
No Data

The dollar found a mild bid in early European trade as data from the region disappointed sending euro towards 1.1700 and cable away from the 1.3300 figure in reaction to the news.

In UK the GDP reading came in at a solid 0.3% reading but Manufacturing Production and Trade Balance both missed their mark. Manufacturing production only rose 0.4% versus 0.9% eyed while Trade Balance deficit widened to -12.3B versus -12B forecast. Economic data in UK has taken a back seat to the political machinations of Brexit as Theresa May grapples with rebellion in her party, but today’s news did not help the bulls.

The consensus view is that UK economy is strong enough for a rate hike, but the geo-political risks of Brexit are making policymakers wary. PM May’s government is due to release a white paper on Brexit this Thursday and markets will be eager to see what concessions it contains. For now, any deal appears to be out of reach and cable remains heavy, with 1.3300 capping any rallies for now.

In Europe meanwhile, the German ZEW survey saw its lowest reading in 6 years as investors have become alarmed at the prospect of a trade war with US. Trump administration’s bellicose policy towards the EU has destroyed optimism amongst European investors despite the fact that business demand remains relatively solid. The EURUSD slid towards 1.1700 but found support for now ahead of the figure.

With no data on the docket in North America, dealing in FX will be driven by whatever headline strikes the screen. Dollar’s strength could accelerate if US yields climb towards 2.90%, but for now the move looks contained as risk currencies continue to see dip buying from longer-term players.