Thursday AM: EUR and GBP Eye European Summit, NZD - No Support from Orr,

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GBP: European Council Summit, Haldane Speech

The Pound is one of the worst performing major currencies at the present time with the currency being kept down by a resurgent US Dollar and ever-present concerns about the shape of Brexit. As we note in today's feature piece though, there is a lot of bad news baked into the Pound and therefore the prospect of a recovery is growing.

The European summit commences today with Europe's leaders gathering to discuss key issues facing the continent.

For Sterling, the outcomes concerning Brexit could be key, but Brexit is only due to be discussed on Friday. We would however expect the potential for Brexit 'chatter' to hit the headlines through the day so will remain vigilant.

At 14:30 the Bank of England's Chief Economist Andy Haldane will be giving a speech, this will be closely watched by markets as Haldane famously opted to vote for an interest rate rise at the Bank's June MPC meeting, a move that caught markets by surprise and ultimately lent support to Sterling.

There is a chance Haldane will give some insights into his thinking and markets will be looking for clues as to just how likely an August interest rate rise at the Bank will be.  

EUR: Migration and Merkel

The European summit has potentially greater implications for the Euro than Sterling, with the issue of immigration shooting to the top of the summit's agenda with the issue flaring up on multiple fronts.

As we note here, Angela Merkel is under pressure to stem the flow of asylum seekers into Germany from those EU countries where they first requested asylum. Failure to seek a negotiated agreement could see the CSU party ultimately exit their coalition agreement with Merkel's CDU.

Italy's new government are meanwhile wasting no time in seeking to deal with the flow of migrants from Libya - they simply won't allow ships that pick up migrants off the African coast to dock in Italy, a move that is causing rifts with Spain, France and Malta.

Indeed, Italy wants European nations to agree to share the arrivals, but the Eastern bloc of European Union countries, have repeatedly rejected the idea.

We will watch this issue unfold over coming days but must reiterate that the Euro will be more interested in Merkel's fortunes at the summit than anything else.

King Dollar

The Dollar is in an uptrend, and there appears almost little point in watching data or global events to explain or anticipate the moves.

The currency touched fresh seven-month highs against the Pound in the mid-week session as it resumed its winning ways. We would say at this stage the trend must be respected and as such expect further gains in the Greenback until a notable regime shift in global FX trends materialises.

"I’m getting confused. Is USD a risk-on or risk-off currency? On Monday it was the best-performing G10 currency as risk-taking sentiment returned, but yesterday it was also the best-performing currency even though risk-taking sentiment declined notably," notes Marshall Gittler at ACLS Global, encapsulating the frustrations and contradictions analysts are facing when it comes to the Dollar.

"In fact there seems to be little correlation between the dollar and risk sentiment," says Gittler who has analysed the connections between the Dollar's performance and the S&P 500. In fact Gittler says there is in fact a random correlation between risk and the Dollar.

New Zealand Dollar: No Support from RBNZ

The New Zealand Dollar remains under pressure with the latest intervention from the country's central bank offering little by way of support.

The Reserve Bank of New Zealand kept the official cash rate at 1.75%, as expected, at their mid-year policy event.

Governor Adrian Orr said the RBNZ is prepared to cut them if needed, since economic growth slows and inflation remains below target.