Market Drivers June 08, 2017
AU Trade misses
EZ GDP beats
Nikkei -0.38% Dax 0.39%
Europe and Asia:
AUD Trade 0.555M vs. 3.16B
CNY Trade 40.8B vs. 46.3B
EUR GDP 1.9% vs. 1.7%
EUR ECB Presser 8:30
USD Weekly Jobless 8:30
USD James Comey Testifies 10:00
GBP UK Election Polls Close 17:00
Super Thursday is here and the FX markets as steeling themselves for a slew of event risks across the G-7 universe that could have a massive market-moving impact. In Europe, the focus will be on the ECB presser. In the US the market will watch the James Comey testimony and in UK all eyes will be on the Parliamentary election expected to return Prime Minister May to office.
With respect to ECB the focus will be on guidance – if there is any – from President Draghi about the timetable for the taper. Today’s just released GDP data for the region showed a healthy bump to 1.9% from 1.7% eyed, but ECB officials have been consistent in their rhetoric that disinflationary pressure remains and that it is too early to consider taper just yet.
If Mr. Draghi persists with this stance, the EUR/USD could give back some ground and perhaps tumble to 1.1150 or 1.1100 on a quick selloff. However, the long-term dynamics for the pair remain positive as growth in the region continues to surprise to the upside and may, in fact, surpass that of the US in the next few quarters. As result, we think that the EUR/USD will be a buy on dips if there is any dovishness from Mr. Draghi.
Next up on the plate will be the James Comey testimony in front of the Senate. The former FBI Director released his written testimony and the market rallied as a result, seeing nothing in it that offered direct evidence of criminal activity. Still, there is some danger in the event and the true buy/sell moment may come when Mr. Comey is asked directly if he thinks that President Trump attempted to obstruct justice. It is unlikely that Mr. Comey will answer that question un unambiguously, but if he suggests that possibility exists that this was the case the dollar could take a quick dive in response.
Lastly, the UK elections are due to end at 2100 GMT and while the almost universal consensus is that Conservatives will win, the magic number range is 340-350 seats. That would provide PM May with a comfortable majority and allow her to commence Brexit negotiations from a position of strength. If Tories win by that margin or better cable should test the 1.3000 level in relief.
Information by courtesy of Boris Schlossberg, Managing Director of FX Strategy, BK Asset Management