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US Open Preview – Pound finds some buyers amid “smooth Brexit” speculation
July 9, 2018 12:26 pmVideo
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Here are the latest developments in global markets:
Day ahead: Quiet calendar, with Brexit & trade developments firmly in focus
The remainder of the economic calendar on Monday features only second-tier data releases, with market focus instead likely to remain on the Brexit narrative, as well as the US-China trade standoff.
In terms of data points, US consumer credit data for May are due for release at 1900 GMT, though this indicator is typically not a major market mover.
In the UK, all eyes remain on politics following the resignation of the Brexit Secretary, David Davis. His departure has been interpreted in differing manners. Some view it as raising the odds for a “softer Brexit”, since one of the leading Brexiteers is leaving and the government’s new Brexit plan may allow the negotiations to move forward. Others argue it weakens Theresa May’s position as Prime Minister, increasing the chances for another leadership struggle within the Conservative Party. Investors seem to be siding more with the former view, but are not particularly confident about it, judging by the fact the pound is higher today – albeit not massively so. Sterling pairs will stay sensitive to any updates.
Turning to trade, markets remained surprisingly calm as the US and China fired the opening salvo in their trade standoff. Up until now, trade threats appeared more as posturing rather than anything else, and hence investors brushed them aside, mostly. However, it’s becoming increasingly more evident the two sides may be entering a vicious, self-enforcing loop of escalation, as neither wants to be seen giving in to pressure. The US has warned it’s considering tariffs on almost all imports from China ($500bn worth), and any hints it plans to follow through with such threats could lead investors to rethink whether this is all still posturing. The Japanese yen will likely remain the barometer for trade tensions, gaining on any escalations, or declining in their absence.
As for public appearances, ECB President Mario Draghi will be speaking at the EU Parliament both at 1300 GMT and 1500 GMT.
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