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Commodity currencies were on the losers’ bench this session as crude oil shrugged off the larger than expected draw in U.S. stockpiles.

Sterling held on to its intraday gains as the Queen’s Speech and Haldane’s remarks lifted the mood in the U.K. while the dollar gained support from upbeat medium-tier data.

  • Queen’s Speech focused on eight bills related to Brexit and crisis situations
  • U.S. existing home sales up from 5.56M to 5.62M vs. 5.54M forecast
  • U.S. crude oil inventories down by 2.5M barrels vs. 1.2M barrels consensus
  • Fed official Harker: Balance sheet trimming to start in Sept
  • Fed official Evans: Balance sheet adjustments not data-dependent

Major Events/Reports

Queen Elizabeth gives Brexit-focused speech

Fans of The Crown gathered ’round their tellies to watch the Queen’s Speech right around the start of the New York session. Following BOE policymaker Haldane’s hawkish remarks, Her Majesty managed to restore a bit of confidence in the U.K. economy in setting a clear agenda for parliament.

In her speech, Queen Elizabeth II outlined eight main bills that lawmakers should focus on in order to usher in a smooth Brexit transition. One of these is the Great Repeal Bill, which would convert all EU laws to U.K. legislation and allow them to decide which ones to keep and which ones to scrap on their own time. She also emphasized the need for an immigration law that is one of the key points of Brexit.

Crude oil holds on to lows

The much-anticipated Energy Information Administration report this week revealed that stockpiles were down 2.5 million barrels, more than twice as much as the expected draw of 1.2 million barrels. This is also larger than the earlier decline of 1.7 million barrels, so oversupply concerns should’ve eased.

However, crude oil barely reacted to the news as market watchers were paying more attention to speculations that the OPEC might implement larger production cuts in order to keep prices afloat. According to Iranian oil minister Bijan Zanganeh, the cartel might need to adjust to rising U.S. output but other delegates said this was unlikely.

  • WTI crude oil is down to $42.59 per barrel (-2.11%)
  • Brent crude oil dropped to $44.85 per barrel (-2.56%)

Harker and Evans talk balance sheet unwinding

The FOMC recently shared more deets on its balance sheet adjustment plans during their latest policy statement but left traders guessing when they might begin.

In a testimony today, Fed official Harker hinted that the central bank might start offloading their holdings by September even if the inflation outlook remains weak. He clarified that it is a largely separate issue from their economic assessment, but noted that they could rethink this timeline if they see a lot of negative data.

However, this also meant that the U.S. central bank might hold off further tightening moves if they fear that it could negatively impact growth. As Harker said:

“It is prudent for us to pause on the next rate increase; at some point, and I would assume it is this year, cease reinvestment; and see how the markets react. We can take our time to do this. We don’t have to be in a rush.”

Fed official Evans echoed these sentiments in saying that they could no longer afford to wait until December before trimming their balance sheet.

Major Market Mover(s):

GBP

The pound was in the green for the day as bulls took some comfort from Haldane and the Queen.

GBP/CAD is up 115 pips to 1.6871 (+0.69%), GBP/AUD is up 102 pips to 1.6764 (+0.61%), GBP/USD advanced from 1.2630 to 1.2670 (+0.32%), and GBP/JPY is up to 141.07 (+0.22%).

CAD & AUD

The Aussie and oil-related Loonie were among the biggest losers as the Kiwi managed to hold its ground ahead of the RBNZ decision.

CAD/CHF is down to .7304 (-0.59%), AUD/CHF fell to .7351 (-0.53%), CAD/JPY dropped 37 pips to 83.63 (-0.44%), AUD/JPY is down to 84.15 (-0.39%), and AUD/USD is testing .7550 (-0.37%).

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