Fundamental Analysis for Majors

27 June, 2017

It seems that investors’ confidence in commodity currencies were renewed as their prices grew while the safe-havens such as CHF and JPY. Yesterday’s most recent bailout of failing Italian bank; Veneto Banca, an increase in oil prices, the high the German Ifo index experienced, and finally ECB President Draghi’s speech restating that interest rates should remain low bolstered investors’ confidence. A continually growing economy and the promise of low rates and the aforementioned events are all economically positive signs.

A feeling of normalization was also helped by the Democratic Unionist Party (DUP) agreeing to back British PM Theresa May, in exchange for an additional £1bn of funding on-top of their already £500 m approved, especially regarding Brexit and budget decisions in the British Parliament. This sets up the Tories with 13-seat majority. Even though this means that Brexit related legislation proposed by the Tories shouldn’t have to compete with significant resistance, an instability or variable that was significantly affecting the pound, it still saw a small drop. This is likely due to the blow-back Theresa May received due to the less than honorable agreement.

The economic calendar is slight of significant events today On event that may affect markets is the distributive trades survey by the Confederation of British Industry (CBI). This is a so called diffusion index – in that it shows the difference between the perceived sales volume increasing and decreasing. Forecasts an indicating towards an increase in the index , strangely the sales index overall is expected to drop. The Bank of England is forecasting the volume of sales to go down as prices go up still out-running pay raises, creating a positive effect for the pound.

A slight drop is expected in US Conference Board consumer sentiment survey The Trump effect seems to be waning and so is investors’ confidence. Even so we are still seeing pre-election levels but this isn’t instrumental or detrimental to the USD.

One the other hand a conservative increase is expected of the Richmond Fed manufacturing survey. This is consistent with this years’ Fed surveys we’ve seen. This will most likely be a dollar positive event.

We should also be aware of today is the ECB’s Forum on Central Banking hosted in Sintra, Portugal – this is an equivalent event to that of the Federal Reserve’s annual Jackson Hole symposium. ECB President Draghi is slated to speak, then a session that will touch on “Innovation, investment and productivity” headed by ECB Board member Benoît Cœuré. The last official event will be a panel discussion headed by Peter Praet, the organization’s Chief Economist.

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