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Sterling Attempting Recovery, But Lacks Momentum

Published 06/29/2016, 03:43 AM
Updated 03/09/2019, 08:30 AM

Sterling attempted to recover yesterday but momentum was very weak without follow through buying. The European Parliament adopted a non-binding resolution yesterday to urge UK to activate the Article 50 to withdraw from EU as soon as possible. European Commission president Jean-Claude Juncker expected some time before UK activates the process. But he emphasized that "if someone from the Remain camp will become British prime minister, this has to be done in two weeks after his appointment" And, "if the next British prime minister is coming from the Leave campaign, it should be done the day after his appointment." Meanwhile, 27 EU leaders, without the presence of UK prime minister Cameron will gather again today. There was increasing voice on the the need to accelerate European integration after the Brexit referendum.

ECB governing council member Ewald Nowotny said there was a "very strong reaction" in the markets and an "overreaction on banks" regarding Brexit and "we now see a period of cooler heads." And, it's too early to react the the development yet. ECB vice president Vitor Constancio said that "in terms of market developments, I think indeed the comparison does not apply because the reaction to Lehman, as you may recall, was that several markets froze, ceased to work." ECB president Mario Draghi refrained by commenting on the Brexit but just mentioned that "Sadness is the best word for what we feel when we witness changes of this magnitude."

In Japan, Prime Minister Shinzo Abe said that "a sense of uncertainty and worry about risks remain in the markets." And, he urged BoJ to "support financial intermediary functioning by providing ample funds to help Japanese firms operating in Britain and other companies in need of funds." On the other hand, BoJ governor Haruhiko Kuroda noted that "at the moment Japanese banks are equipped fully with dollars and foreign currencies. In that sense, the scale (of the dollar-supplying operation) was small and I don't think there's any problems at all with Japanese banks' dollar funding."

On the data front, Japan retail sales dropped more than expected by -1.9% yoy in May. German Gfk consumer sentiment rose to 10.1 in July. Swiss UBS consumption indicator rose to 1.35 in May. UK nationwide house price rose 0.2% mom in June. Eurozone confidence indicators will be the main feature in European session and German will release CPI flash. UK will release mortgage approvals and M4. US will release personal income and spending, pending home sales later today.

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