Chief economist Andy Haldane said that persistent low inflation could lead the Bank of England to actually cut rates. Nobody really thinks this will happen, hence why the remarks had little effect on a pound that is making the most of FOMC-led dollar weakness. The sole remit of the BoE has historically been to keep inflation at the target of 2.0%, and with the benchmark reading of CPI flatlining at 0.0% growth, Haldane’s comments are understandable, however just at last week’s meeting we saw one member vote for a rate hike. Public sector net borrowing data is realised on Thursday, and although it’s generally completely ignored, it’s the only piece of data this week form the UK (apart from BBA Mortgage approvals and some house price data that nobody pays any attention to) so it could have a mild effect on markets if it comes in significantly out of line of analysts’ expectations. JP Morgan and Morgan Stanley are short GBPUSD, targeting 1.52 and 1.51 respectively – they are range trading and so this shouldn’t be taken as long term expectations of sustained sterling weakness.
San Francisco Fed President Williams told Fox News yesterday morning that the decision to hold US interest rates at the record low of 0-0.25% was a close one. The US employment environment is practically at ‘full employment’ (where everyone who wants a job has one, different to 100% employment, which can fuel inflation), and it was just concerns over the global economic situation, specifically China, that caused the FOMC to hold back for at least six more weeks. Adding to support for the dollar will be further comments by St Louis Fed President Bullard who said that he would have dissented and voted for a hike (he is a non-voting member) as the committee’s policy objectives have been met.
Syriza won the most number of votes in yesterday’s general election. Tsipras said that it was a clear and decisive victory for the anti-austerity party. Only it wasn’t really, as even with the bonus 50 seats awarded for coming first, Syriza still needed to form a coalition with the Independent Greeks party in order to create a government capable of a majority. Barclays remains short EURUSD, still expecting to see 1.04ish – it’s worth noting that their last EURUSD short position didn’t go so well, entering at 1.1240, walking away licking their wounds at 1.1480. In the last 12 months we’ve seen Barclays take 12 major positions, eight of which they ended up losing on, and half of those eight involved the euro. SocGen and BNP Paribas take the crown for most profitable individual trades so far this year, both of which were short positions in EURUSD.
Telegraph – Banks pay £31bn in tax as fortunes recover.
Independent – Concorde could fly again by 2019.
FT – Square Mile wants to engage with radical anti-capitalist Corbyn.
Forex News – UK Pound Sterling, US Dollar and EUR single currency commentary provided by Argentex