Central Bankers in Focus, with the Pound in the Spotlight

It’s another quiet day on the economic calendar, with no material stats to speak of out of the UK or the Eurozone through this morning’s session, leaving the markets to ponder over what’s to come, with BoE MPC members Haldane and Broadbent scheduled to speak ahead of the ECB’s Coeure.

Following last week’s UK private sector figures for June and trade and manufacturing numbers for May, the big questions will be whether Haldane retains his hawkish sentiment towards monetary policy and whether he still deems it appropriate to lift rates at the next MPC.

The UK BRC Retail Sales monitor for June, released in the early part of the Asian session, provided some much needed good news, the sales monitor rising by 1.2%, though it certainly wasn’t considered enough by the markets, with any initial upside in the pound following the release of the numbers, easing with cable sitting in the red at the time of the report.

There’s no guarantee that either Haldane or Broadbent will deliver views on the upcoming MPC, but we can expect the pound to recover from last week’s declines should Haldane retain his particularly hawkish view on monetary policy and Broadbent follow suit.

In the June MPC, neither Haldane nor Broadbent voted in favour of a move, with the dissenters being the departed Kristin Forbes together with Ian McCafferty and Michael Saunders. There’s going to need to be 4 in favour to support a reversal of last August’s easing and with Forbes being replaced by a dove, Haldane and Broadbent will need to be in favour to deliver a 4-4 split, which would place the outcome in the hands of BoE Governor Carney.

We’ve heard from Carney, who delivered a surprisingly hawkish view on monetary policy, though whether Carney will actual vote in support of the increasing number of dissenters is an altogether different proposition.

Uncertainty, following last week’s stats, will certainly deliver a bounce in the pound, should hawkish sentiment prevail, with cable having given up $1.30 levels going into July.

Across the pond, the markets will have May’s JOLTs job openings to slice and dice together with the release of the Redbook data, with the more dovish voting FOMC members Brainard and Kashkari also scheduled to speak late in the U.S session.

We have seen the Dollar in recovery mode of late, with the Dollar Spot Index up a further 0.15% at 96.164 at the time of the report, the gains coming ahead of the FED Chair’s semi-annual monetary policy report to Congress and perhaps of more relevance, June retail sales and inflation figures due out on Friday.

Yellen has maintained her view of one-offs attributing to the softening in inflation and there was some vindication off the back of Friday’s nonfarm payroll numbers, so while the markets will respond to today’s data, the fate of the Dollar this week will be in the hands of the FED Chair and Friday’s stats.

A lack of stats or hawkish commentary from ECB members has left the EUR on the back foot and, while the ECB’s Coeure may provide some insight on where the ECB sits vis-à-vis the timing of a shift in policy, the markets will need to see Draghi ultimately deliver a timeframe on a tapering to the asset purchasing program before the EUR can make a move towards $1.15 levels against the Dollar.

Central bankers continue to dictate the direction of the respective currencies, macroeconomic data on the lighter side, with the pound likely to see the biggest moves through the day, while we will expect the Dollar to remain in recovery mode through to this afternoon’s stats.