Last week saw markets enjoy one of their best weeks in over two months, US equities performing particularly well as China/USD trade tensions eased and President Trump confirmed that his meeting with the North Korean Leader would be in Singapore. North Korean talks are progressing and dismantlement of nuclear test sites is expected to happen in a couple of week which is expected to result in reduced sanctions. Other issues still simmer away in the background, NAFTA talks continue and there are a number of various moving parts to this complex negotiation but for now markets are pricing no risk.
Closer to home and PM May continues to struggle to find a balance of unity amongst her party, Boris Johnson seems to insist there is no plan at all in place all the while PM tries to toe the fine line been appealing to those who want some form of customs union vs hard line brexiters who refuse to bow to any EU demands whatsoever, then in the middle of all this remains the Irish boarder issue. This is all happening before the UK even chat with their EU counterparts for deeper discussion. For their part EU leaders, notably Ireland’s Taoiseach Leo Varadker, have said they are “willing to find a solution that works”. Well, we should hope so, but the likelihood of this getting resolved and everyone being happy is slim to none. GBP continues to trade a mixed bag. Its struggled vs the USD and EUR in recent weeks and last week’s BOE was taken as dovish which hasn’t helped matters much. There’s also the ongoing tensions between Israel, Iran and Europe. But again markets seem little put out by potential escalation, with the exception of oil prices which are up over 1.% over the course of the last week, despite dropping back some .5% over the weekend.
There are several ECB speakers due across the wires this morning so we’ll be keeping a close eye on the euro this morning. In fact we almost have the whole governing council speaking throughout the day so it would be surprising to not see some reaction from the euro today. The single currency was in fact one of the stronger performers last week but the real proof will be in German GDP due Tuesday and CPI data for the Eurozone due for release on Wednesday, which is closely followed by a speech from Mario Draghi. Plenty of action to watch this week for the single currency, EURUSD still bouncing form lows just above 1.1800, 1.2000 will mark first resistance and markets will be keen to see if we can get a break and hold above there, resuming the previous uptrend. EURGBP bounced off resistance turned support around the .8780 area, while the area I am watching is above .8850, which would signal a break above the larger down trend from June last year and could see EURGBP test back towards min .8900’s.