Market Drivers June 30, 2016

Yuan fixing causing wobbles in Asia
UK Current Account deteriorates
Nikkei 0.06% Dax -0.25%
Oil $49/bbl
Gold $1320/oz.

Europe and Asia:
AUD Private Sector Credit 0.4% vs. 0.5%
EUR GE Unemployment -6K vs. -5K
GBP Current Account -32B vs. -28B

North America:
USD Weekly Jobless 8:30
CAD GDP 8:30

Currencies were generally steady in Asian and early European trade with the the exception of cable which travelled a full figure from top to bottom and continued to be capped at the 1.3500 level as the post-Brexit short covering rally met resistance for the second day in a row.

UK economic data was of little help to the bulls as the Current Account deficit expanded to -32B GBP versus -28B eyed and the month prior was revised downward to -34B. For now the markets continue to ignore all the macro releases as the focus remains squarely on politics, but should the new Tory leader make good on the promise of invoking Article 50 the Current Account deficit figure are likely to receive far greater scrutiny in future releases.

The political situation in UK has only become muddier over past few hours as NY Times reported that Michael Cove abandoned his support for Boris Johnson and will run for Tory leadership himself. The race for Tory leadership is now shaping up a bruising battle with Johnson himself still undeclared. This only adds to the uncertainty of the situation and given the turmoil on the other side of the aisle with Jeremy Corbyn could create the potential for an early Parliamentary election if the transition is not quickly achieved.

Meanwhile BoE governor is due to deliver a post-Brexit market update today at 1500GMT. Markets will be carefully watching his every word but given the fact that he earned the ire of Brexit proponents during the campaign, Mr. Carney is likely to be very careful in his rhetoric and will no doubt try to reassure the markets that the financial operations continue to function smoothly. Still if he acknowledges that UK economy is likely to suffer a near term hit to growth, cable could plummet once again to test the recent lows near the 1.3200 figure.

In North America today the calendar is relatively light with only jobless claims on the docket and Canadian GDP. The focus is likely to be on Mr. Carney’s remarks as Brexit remains the primary concern of the market.

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