Market Review - Fundamental Perspective - 25 May 2018

Global equities closed lower yesterday amid rising concerns about geopolitics and trade. In FX, JPY gained initially in this environment but fell overnight for the first time in four days after North Korea indicated that they are still open for a meeting with the US despite the cancelled summit
GBP rallied on the back of better-than-expected retail sales data yesterday, but pared its gains later on headlines that progress in negotiations on the EU-UK relationship post-Brexit has stalled (Bloomberg)
Today’s focus is on any further Brexit-related headlines as well as the 2nd release of domestic GDP data at 9.30
Our traders currently see GBPUSD support at 1.3300 ahead of 1.3000 and resistance at 1.3425 ahead of 1.3500. EURGBP likely remains in the 0.8725-0.8800 range, with the wider range between 0.8690 and 0.8840-75
The ECB minutes released yesterday contained no surprises. The ECB noted that risks to the growth outlook were still broadly balanced and that weaker data was due to temporary factors, but that the slowly improving inflation is subject to weak price pressures
TRY sold off yesterday, reversing some of its gains which it experienced due to the CBT’s emergency rate hike of 300bp on Wednesday. TRY behaviour and global sentiment will be closely watched as they will likely determine the CBT’s potential policy action at the 7 June MPC meeting
The SARB kept its repo rate unchanged at 6.5% and released a more hawkish statement as expected. Barclays Research believes that a key driver of future policy will be the impact of a weaker ZAR on inflation, as well as the second round effects of higher oil and VAT increases

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