LONDON (Reuters) - Two events today are due to highlight the uncertain political and economic climate Britain faces as it gears up for Brexit negotiations.
In a well-trailed speech marking a year since she became leader of the Conservative Party, Theresa May will acknowledge that her minority government will need help from political rivals to achieve any meaningful reforms while in power.
She will make the call at the launch of a report into how the government should protect workers in the "gig economy" - perhaps a deliberate piece of timing to highlight her professed concern for social justice after the Brexit vote showed that millions of Brits feel like second-class citizens. The question is whether the Labour Party's Jeremy Corbyn, the wind in his sails after last month's election, sees much benefit in playing ball to keep the May premiership afloat.
A second set piece will if anything be more closely watched by financial markets. Bank of England Deputy Governor Ben Broadbent, who has not yet commented publicly on the future direction of UK interest rates since a narrow 5-3 vote to keep them unchanged last month, will deliver a speech at midday local (1100 GMT) while on a visit to Scotland. All eight current members of the Bank's policy-setting committee MPC have spoken since that meeting except for Broadbent and new committee member Silvana Tenreyro, who took up her post this month.
MARKETS AT 0755 GMT
A renewed calm has descended on world markets after the bond market jolt of the last couple of weeks, with investors awaiting Wednesday’s semi-annual congressional testimony from Federal Reserve chief Yellen and this week’s start of the Q2 U.S. earnings season.
Tech stock gains helped Wall St nudge higher overnight, with the Vix volatility gauge slipping back down toward 11 percent.
Ten-year Treasury yields and the dollar are firmer as Yellen is widely expected to see through the recent relapse in inflation rates and signal another interest rate rise by the end of the year alongside the start of the Fed’s balance sheet wind-down.
With the relative calm buoying Asia stock markets, the most interesting move overnight was the rise in dollar/yen to a new 4-month high of 114.47, helped by the Bank of Japan’s insistence for now on keeping a lid on Japanese government bond yields, even as other central banks nod to tighter monetary policy and benchmark yields elsewhere move higher.
The fall of the yen and Treasury bond prices is also seeing other perceived ‘safety’ trades on the back foot in sympathy – with gold, Swiss franc and even Bitcoin moving lower.
Sterling also moved lower as traders eyed a speech from key Bank of England policymaker Broadbent at noon London time on Tuesday after a slew of weak economic readings over the past week. With BoE policymakers increasingly split on the need for higher interest rates in the UK, deputy governor Broadbent is considered one of the crucial swing votes.
Elsewhere, crude oil is firmer with Brent back above $47. European stocks are expected to open higher and bund futures are down early on. South Africa’s rand dropped to a new 7-week low as political pressures continue and Russia’s rouble and Turkey’s lira are also lower as the recent sell-off in high beta EM currencies resumes.
Editing by Andrew Heavens