Brexit still top of the agenda for Bank of England and the Pound

Today's Highlights

• Cautious tone from New Zealand's central bank

• Fed confident Trump won't trump markets

• Pound still under Brexit pressure

 

Current Market Overview

Overnight, the Reserve Bank of New Zealand (RBNZ) left interest rates on hold; however, the New Zealand central bank hinted that there may be interest rate cuts in the near future in order to stimulate the anaemic economy. The rate decision itself was in line with expectations, although considering the stronger growth figures reported, the RBNZ were surprisingly cautious in their approach. They cited a slower global growth outlook and markets are now anticipating a cut in rates at the August meeting.

Fed confident Trump won't trump markets

Federal Reserve Chairman, Jerome Powell, pushed back after Donald Trump's daily insults – he said, "the Fed is insulated from short-term political pressures – what is often referred to as our ‘independence.' Congress chose to insulate the Fed this way because it had seen the damage that often arises when policy bends to short-term political interests. Central banks in major democracies around the world have similar independence."

After the dovish minutes from the most recent Federal Open Market Committee (FOMC) meeting, markets have been pricing in aggressive rate cuts from the Federal Reserve this year. Uncertainty around the escalating US-China Trade war and lacklustre inflation are a cause for concern, although most still expect a 25Bps reduction in July.

Pound still under Brexit pressure

The Pound, which is still under pressure due to "No deal Brexit" concerns, will take its cue from commentary from Bank of England (BoE) Governor, Mark Carney, and his colleagues later this morning. They will be speaking at the Treasury Select Committee and Brexit will be top of the agenda. The Bank of England Governor and Boris Johnson have publicly disagreed on whether or not the UK would be able to trade on existing terms if the UK left the EU with no deal; and investors will be looking for some clarity.

Data diary today could add to currency uncertainty...

Data today includes UK mortgage approvals, US Durable Goods Orders and trade data from the US Dollar. Watch this space...