Macro Commentary

Boris Johnson becomes the new Prime Minister, and reiterates his pledge to leave the EU on 31st Oct. The challenges are huge and it will be a very interesting few months ahead as he tries to negotiate a way forward.

The ECB met yesterday, and adjusted their forward guidance as expected, indicating further policy easing in September, as the European economy continues to struggle. We expect a further 0.10bp cut to rates, taking the deposit facility rate to -0.50%. An increase to the QE program is also likely.

In the US, the focus is very much on next week’s Central Bank meeting, with the market looking for an interest rate cut of 0.25%. A cut of 0.5% remains a possibility, with inflation, slowing global growth and the ongoing Chinese trade dispute all weighing on sentiment.

On the exchanges, sterling remains under pressure on the increased risk of a no-deal Brexit.

GBP/USD has found a short-term base for now at 1.2400, however we would need a break above 1.2750 to alleviate the current negative sentiment.

GBP/EUR met some decent buying interest at 1.1050, ahead of stronger support at last year’s low of 1.1000, but we would need a closing break above 1.1300 to gain some upside momentum.

GBP/USD – 1-year chart

Week ahead

Date Release Last Expected*
29/7/19 UK Mortgage Approvals 65.4k  65.8k
31/7/19 EU CPI Core YoY 1.1% 1.0%
1/8/19 UK Markit PMI Manufacturing SA 48.0 48.0
1/8/19 UK BOE Bank Rate 0.75% 0.75%
1/8/19 UK BOE Inflation Report
2/8/19 UK Markit/CIPS Construction PMI 43.1 46.0
2/8/19 US Change in Nonfarm Payrolls 224k 160k

*Bloomberg survey

Equity Indices

Indices Previous Close YTD % Change
FTSE 100 7489 +11.48%
S&P 3003 +19.82%
EUROSTOXX 3510 +16.97%
DFM GENERAL INDEX 2850 +12.64%

Foreign Exchange

Currency Last Currency Last
EUR/USD 1.1140 AUD/USD 0.6935
GBP/USD 1.2435 USD/AED 3.6730
GBP/EUR 1.1165 GBP/AED 4.5680
USD/CHF 0.9915 EUR/AED 4.0915
USD/JPY 108.65 XAU/USD 1419

UK Benchmark Rates

Libor   Swap Mid  
3 month 0.78175% 2 year 0.73%
6 month 0.80488% 3 year 0.74%
12 month 0.85825% 5 year 0.78%

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