Oil prices are again lower weighing on energy shares and commodity linked currencies while US Treasury yields are little changed after initially moving higher following the move in UK Gilts. GBP has been the big mover in currencies amid a reopening of BoE rate hike debate and as we are about to press the send button, the RBNZ has left the OCR unchanged at 1.75%. The language in the statement is very similar to the May’s MPS, but the NZD has rallied given some expectations for a dovish statement amid recent NZD strength and lower oil prices.

Last week BoE unexpected 5-3 vote decision to leave the cash rate unchanged gave the pound an uplift and a day ago Governor Carney triggered a sell off as he seemingly shut the door on the idea of any tightening any time soon. Twenty four hours later the debate has been reopened again with BoE Chief Economist Andy Haldane admitting that he did consider voting for a rate hike last week and although in the end he sided with the 5-3 majority to stand pat, he noted that “The risks of tightening ‘too early’ have shrunk as growth and, to lesser extent, inflation have shown greater resilience than expected”. All that said, a closer look at Haldane speech shows that his thinking is not that dissimilar to Carney’s. Although Haldane clearly has a tightening bias, he also notes the high level of uncertainty, so if things pan out ok, then a small tightening would be appropriate. The message from Carney on the other hand is that he wants to see how “the extent to which weaker consumption growth is offset by other components of demand” before reassessing the inflation and stimulus trade off.

Reaction to Haldane’s comments triggered a GBP rally across the board and a selloff in Gilts led by the front end of the curve. Pricing expectations for a December hike jumped from 20% to 44% and cable jumped from 1.2591 to 1.2708. The Queen speech turned the focus back into politics and Brexit, noting the government’s plan to introduce eight new laws to ease Britain’s withdrawal from the European Union. The speech weighed on GBP, dragging cable down to 1.2672.

Excluding NZD, softness in oil prices (-2.2% to -2.6%) has been the dominant factor for commodity linked currencies despite the fact that other commodities such as copper (+1.5%) and iron ore (+0.7%) had an OK day. So CAD (-0.48%) and AUD (-0.37%) are at the bottom of the G10 leader board, NZD has been boosted by a neutral RBNZ, despite some dovish expectations which has seen the Kiwi jump about 30 pips to 0.7253. The move higher in GBP appears to have contributed to European currencies also outperforming the USD, although on index terms the USD is little changed.

Looking at US equity markets performance is probably worth highlighting that as much as energy shares are again the underperformers, amid weakness in oil prices, Health care is the outstanding outperformer. The sector is up 1.23% boosted by speculation of deregulation on the drug industry and the prospect of Republicans unveiling their health care bill later this week. Watch this space.

Coming Up

Now that the RBNZ is out of the way, the rest of the agenda items for today are unlikely to elicit big market moves.

This morning New Zealand gets net migration numbers as well as credit card billings and BoJ Iwata speaks in Aomori. Later today, European Union Leaders begin a two day summit in Brussels looking at a number of pressing issues, including migration, security, defence, and economy. The European Council (Art. 50) will also meet to discuss Brexit.

Europe’s preliminary June reading of consumer confidence is out today and the UK gets its CBI trends in total orders and selling prices. The US releases its weekly jobless claims and the May leading indicators reading is also due out. Fed Governor Powell speaks at a hearing of the Senate Banking Committee and whilst the focus is likely to be on regulation, he is known to have a dovish inclinations and any comment on the economy and monetary policy will be closely monitored. Moving across the northern border, April retail sales figures are out in Canada where the headline number is expected to drop to 0.3% mom from 0.7% previously.

Overnight

On global stock markets, the S&P 500 was -0.06%. Bond markets saw US 10-years +0.69bp to 2.16%. In commodities, Brent crude oil -2.67% to $44.79, gold+0.2% to $1,243, iron ore +0.7% to $56.82, steam coal -0.1% to $80.70, met. coal +0.0% to $145.00. AUD is at 0.7555 and the range since yesterday 5pm Sydney time is 0.7543 to 0.7586.

Good luck.

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• Markets Today: 22 June 2107 (PDF, 1MB)

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