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British Pound Soars Before BOE Sounds Off on Financial Stability

British Pound Soars Before BOE Sounds Off on Financial Stability

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Pound soars with risky assets before BOE’s Carney speaks on financial stability
  • Anti-risk Yen plunges, sentiment-linked Aussie and NZ Dollars rise with shares
  • US Dollar eyeing Fed-speak as interest rate hike speculation shows signs of life

Central bank commentary is back at the forefront for financial market. First, the Bank of England will publish minutes from the post-referendum FPC meeting and policymakers including Governor Mark Carney will testify on financial stability before Parliament’s Treasury Committee.

With the markets steadying after a sharp deterioration in financial conditions in the immediate aftermath of last month’s UK EU membership referendum, traders may be most interested in what the central bank is doing to soften Brexit’s longer-term implications.

A broad range of concerns is likely to be discussed but the central question in need of answering seems to be whether post-referendum volatility met, exceeded or undershot the BOE’s projections. Getting some sense on that may emerge as a formidable driver for market-wide sentiment trends in the near term.

Sentiment was decidedly rosy overnight amid apparent pre-positioning for a an upbeat BOE assessment, with the British Pound rallying alongside risk-on assets including shares well as the Australian and New Zealand Dollars. The anti-risk Japanese Yen traded sharply lower.

Fed-speak will be in the spotlight later in the day as comments from Governor Daniel Tarullo as well as St. Louis and Minneapolis branch Presidents James Bullard and Neel Kashaki cross the wires. Policy bets have quietly firmed, with the chance of 2016 rate hike more than doubling this week compared with the last.

The US Dollar seemed to find a degree of support in the past 24 hours from cautiously hawkish remarks from Esther George and Loretta Mester – Presidents of the Kansas City and Cleveland Fed branches. It will be interesting to see if this can be sustained in event that less overtly pro-tightening officials follow suit.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

23:01

GBP

BRC Sales Like-For-Like (YoY) (JUN)

-0.5%

-

0.5%

23:30

AUD

ANZ Roy Morgan (JUL 10) Consumer Confidence

115.2

-

115.8

23:50

JPY

PPI (MoM) (JUN)

-0.1%

-0.1%

0.1%

23:50

JPY

PPI (YoY) (JUN)

-4.2%

-4.2%

-4.3%

01:30

AUD

NAB Business Conditions (JUN)

12

-

10

01:30

AUD

NAB Business Confidence (JUN)

6

-

3

01:30

USD

Fed's Mester Speaks on Banking/Financial Stability

-

-

-

01:30

AUD

Credit Card Purchases (A$) (MAY)

26.0b

-

23.5b

01:30

AUD

Credit Card Balances (A$) (MAY)

51.9b

-

51.8b

03:30

AUD

RBA's Ellis Gives Speech in Sydney

-

-

-

04:30

JPY

Tertiary Industry Index (MoM) (MAY)

-0.7%

-0.7%

1.4%

04:30

JPY

BOJ's Household Sentiment Survey

-

-

-

European Session

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

06:00

EUR

German Wholesale Price Index (MoM) (JUN)

0.6% (A)

0.9%

Low

06:00

EUR

German Wholesale Price Index (YoY) (JUN)

-1.5% (A)

-2.3%

Low

06:00

EUR

German CPI (MoM) (JUN F)

0.1% (A)

0.1%

Medium

06:00

EUR

German CPI (YoY) (JUN F)

0.3% (A)

0.3%

Medium

06:00

EUR

German CPI - EU Harmonized (MoM) (JUN F)

0.1% (A)

0.1%

Low

06:00

EUR

German CPI - EU Harmonized (YoY) (JUN F)

0.2% (A)

0.2%

Low

08:30

GBP

BOE Publishes Record of FPC June 28 Meeting

-

-

High

09:00

GBP

Carney Speaks on Financial Stability in London

-

-

High

09:40

GBP

BOE Indexed LTRO Results

-

-

Medium

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.0932

1.0991

1.1024

1.1050

1.1083

1.1109

1.1168

GBPUSD

1.2622

1.2789

1.2893

1.2956

1.3060

1.3123

1.3290

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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