Macro Commentary

The Bank of England kept policy on hold yesterday, and seem set to remain that way until the outcome of Brexit becomes clearer. However, it does appear the divergence of views on the committee is widening.

It is politics however, that continues to dominate the headlines as the conservative party leadership race plays out.

In the US, the central bank also kept rates on hold this week, though almost half of policymakers expect lower rates this year, on concerns about the growth and inflation outlook.

Whilst in Europe, central bank president Draghi said that should the economy continue to weaken, more stimulus is available, including cutting rates further.

On the exchanges, the dollar has weakened on the prospect of lower US rates, giving sterling some respite.

GBP/USD found a base just ahead of 1.2500 as expected, but we need a closing break above the pivotal 1.2750 level to alleviate the short-term negative sentiment.

GBP/EUR initially dropped to its lowest levels since January to around 1.1150 before rallying strongly. We need a break above the 1.1300 level to gain some further upside momentum.

GBP/EUR – 1-year chart

Week ahead

Date Release Last Expected*
28/6/19 UK GDP YoY 1.8% 1.8%
28/6/19 UK Current Account Balance -23.7b -31.6b

*Bloomberg survey

Equity Indices

Indices Previous Close YTD % Change
FTSE 100 7424 +10.62%
S&P 2954 +17.84%
EUROSTOXX 3468 +15.89%
DFM GENERAL INDEX 2658 +5.06%

Foreign Exchange

Currency Last Currency Last
EUR/USD 1.1310 AUD/USD 0.6925
GBP/USD 1.2700 USD/AED 3.6730
GBP/EUR 1.1230 GBP/AED 4.6650
USD/CHF 0.9830 EUR/AED 4.1540
USD/JPY 107.45 XAU/USD 1387

UK Benchmark Rates

Libor   Swap Mid  
3 month 0.78413% 2 year 0.86%
6 month 0.86988% 3 year 0.86%
12 month 0.98225% 5 year 0.90%

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