Both the Eurozone markets and the futures markets for U.S. equity indices traded down in the early part of the London-European session. Investors in U.S. markets will be wary of taking new positions until Fed Chair Jerome Powell begins to deliver his two-day testimony in front of a finance panel in Washington, investors will also be mindful of the publication of the FOMC minutes from June’s meeting this evening at 19:00pm U.K. time. At 9:00am U.K. time the dollar index, DXY, traded close to flat at 97.46. The SPX futures price traded down -0.17% and the NASDAQ down -0.20%. Germany’s DAX traded down -0.13% with the U.K. FTSE 100 up 0.15%.
USD/JPY traded in a tight range with a
bullish bias, up 0.10% at 108.94 threatening to breach the first level of
resistance. USD/CHF traded down -0.19% as strength has returned to the Swiss
franc over recent trading sessions after the Swiss economy recorded falling
unemployment and the Swiss economy and banking system continues to act as a
safe and secure haven for currency investors. EUR/USD traded up 0.18% as euro
bullishness appeared across the board. EUR/GBP breached the 0.900 handle rising
by 0.12% recording a seven month high.
New Zealand’s dollar experienced sharp
spikes downwards versus many of its peers, during the Sydney-Asian session due
to reports from the Governor of the RBNZ, the central bank of N.Z., that the
bank has the capacity to reduce interest rates in order to stimulate the
economy. NZD/USD reclaimed a proportion of the losses after crashing through S2
to trade down -0.10% at 0.659. EUR/NZD traded up 0.20%. The Aussie dollar also
traded down through the Asian and early part of the London sessions, AUD/USD
traded down -0.10% on the day and -1.66% weekly.
The televised debate between the two
challengers for the leadership of the Tory party and de facto position of U.K.
prime minister caused the U.K. pound to fall further in late trading on Tuesday
evening. Despite manufacturing production and industrial production falling
significantly month on month, construction and services output beating the
forecasts helped U.K. GDP rise by 0.3% in the month of May, resulting in the
three month rolling GDP figure coming in at 0.3% beating the forecast of 0.1%
growth. Sterling failed to react significantly to the optimistic data releases
as analysts may have doubted the veracity of the construction output figure,
based on the fact that the most recent Markit PMI for U.K. construction showed
a decade low contraction figure of 43.1 a low not seen since 2009. At 9:50am
GBP/USD remained trading close to the daily pivot point up 0.11% at 1.247.
The Bank of Canada’s interest rate
decision will be revealed at 15:00pm U.K. time, the widely held consensus is
for a hold of the rate at 1.75%. The value of CAD versus its main peers may
come under close scrutiny if any accompanying narrative from the BOC indicates
a change in monetary policy. The most likely forward guidance would include a
commitment to a rate cut should the key economic metrics worsen.
At 15:00pm Jerome Powell begins his
two-day testimony in front of a finance panel up on Capitol Hill, Washington.
Analysts and traders will closely monitor the testimony for clues as to how the
Fed Chair and his colleagues at the FOMC intend to apply monetary policy over
the short to medium term. Evidence of this management will also be revealed at
19:00pm U.K. time when the latest FOMC minutes from the June policy meeting
will be published.