Friday Sunrise: GBP - Brexit is Back, EUR - Disappointing German IP Data, CAD - Employment Data, ZAR - Suffering

The Pound: Brexit's Back

Positive comments on the UK economy from BoE’s Dave Ramsden, released lat on June 7, saw the GBP erase most of the earlier losses stemming from the day's Brexit intrigue.

Ramsden said that the early signs are that the UK economy is bouncing back in the second quarter and a period of “unusually subdued” wage growth is coming to an end.

Watch for further Brexit headlines today too, in light of yesterday's gyrations in the currency over the matter.

"Intra‑day volatility has spiked, but GBP/USD has held up relatively well trading around 1.3420 considering the political pressure being applied to Prime Minister Theresa May after she delivered her Brexit custom’s union proposal," says Richard Grace at CBA in comments made this morning.

Hitting the desk this morning is an interesting comment from Commerzbank on the matter of Sterling and the state of ongoing Brexit negotiations:

"Sterling reacted to the government crisis and the publication of the proposal with significant fluctuation. It remains to be seen how useful the proposal is. I cannot help but feel that it is another desperate attempt to please everyone - Brexit supporters, Brexit opponents and the EU. An attempt that once again stands every chance of being rejected outright by the EU; and as a result the drama queen and her government might be toppled one day. Conclusion: in my view a risk premium on Sterling remains very much justified."

Euro: German Industrial Production Disappoints

German industrial production just out has disappointed by contracting 1% on a month-on-month basis in April. Markets were looking for an increase of 0.3%.

The Euro is marginally lower across the board in light of the numbers but we would suggest damage will be limited as markets are single-mindedly focussed on next week's European Central Bank meeting.

Canada: Employment Numbers

Another big day of data for the Canadian Dollar which has been showing a good deal of movement of late.

Markets are looking for the employment change to read at 17.5K for May, and the unemployment rate to remain static at 5.8%.

A beat will help CAD, a miss should trigger some weakness.

Analysts at TD Securities looks for the economy to add 8k jobs in May, well below the more upbeat consensus for 23k.

This should pressure the unemployment rate to 5.9% (market: 5.8%) while a rebound in part-time job growth should add to the downbeat tone.

Rand: Trade Fears and the G7

Another big move lower by the South African Rand this morning and yesterday, and global market sentiment is once again playing its part with caution creeping back into the market ahead of this weekend's G7 summit which could give some negative headlines for global trade, and thus global growth.

"Some unease emerged over the EM FX space, led by sharp declines in the
ZAR and BRL overnight. Some consolidation, though, was seen in the TRY.
Nevertheless, some near term contagion effects may be detected," says Terence Wu, Treasury Research & Strategy at OCBC, noting the broader troubles for emerging market currencies.

"The upcoming G7 summit has been cited previously as a risk event on the
trade front, and the markets appears to be (finally) taking notice. Note that the signs heading into the summit are less than positive, with Trump unlikely to make concessions on trade, and the European leaders considering reciprocal actions," says Wu.

Wu says if trade tensions escalate over the weekend, expect the markets to revert to a risk-off mood next week, perhaps leading to some support to the JPY, CHF and USD. Expect the ZAR to head the other way.

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