Morning Report: 16 November 2017

November 16, 2017

GBP Sterling was making gradual inroads against the USD during the morning, only to see all of its gains evaporate after the dollar found its feet at the start of the afternoon. Against the euro, the day was lived in reverse; a morning with sterling weakness was later compensated during the afternoon. This morning brought the British pound some weakness for breakfast after Politco reported the European Union had turned down British attempts to establish a bespoke trade deal with the EU. The story based on leaked documents mentioned that the stance of the EU is “no direct branching in areas like financial services” and only “limited EU commitments to allow cross border provision of services”. Average Weekly Earnings were slightly stronger than expected with an annualized growth in the last 3 months of 2.2%. Today at 9:30 BST we have Retail Sales, concluding the UK triad of top tier releases of this week.

EUR The euro was on a solid rally yesterday throughout the morning, extending the gains it made earlier this week against most of the G10 currencies. A bit after midday euro began to retreat, but not before putting a four week high on the board against USD and breaching multi-year record highs against Scandinavian currencies. Global risk sentiment seems to have been the driver behind this euro strength. Little data was released for the Eurozone yesterday, besides the French final Consumer Prices that grew 0.1% as expected in October. Today we have the final Consumer Price numbers for the entire Eurozone at 10:00 BST.

USD The US dollar weakened across the board during the morning, only to turn things around after midday and close more or less at the same place where it started against sterling, euro and a crowd of other currencies. The Consumer Price Index came in “unexpectedly on expectations” after having core CPI disappointing in 6 out of the last eight months. Now CPI seems to be making its way back to its trend level of 0.2% growth per month the story of the Federal Reserve that the weak inflation seen earlier this year was due to transitory factors is gaining in credibility. Core Retail Sales disappointed but a strong headline reading, supported by hurricane-boosted car sales, made up for this and started the USD afternoon rally. Today at 13:30 BST we have unemployment claims together with Import Prices and the Philly Fed Manufacturing Index, followed by Industrial Production at 14:15 BST.

CAD The loonie weakened, just like the Mexican peso, in anticipation of the North Atlantic Free Trade Agreement (NAFTA) talks that resume tomorrow. A tense atmosphere is expected in which the US trade delegation will make tough demands that by some are seen as so unreasonable that they run the risk of blowing up the treatment. Unstirred oil prices did little to support CAD meanwhile. Today at 13:30 BST we welcome the Canadian ADP non-farm Employment change, Foreign Securities Purchases and Manufacturing Sales.

UK news

  • FT: Banks urge Brexit trade deal that keeps financial services on track Free movement for professionals vital to preserving cross-border flows, says industry. Britain’s banking industry has called for a post-Brexit trade deal to allow financial services professionals to continue travelling freely across Europe on assignments of up to three years. The proposal, coming shortly after David Davis, the Brexit secretary, promised to seek a similar travel regime for bankers, is one of several recommendations in a report to be published on Thursday by UK Finance, the industry body, and law firm Clifford Chance. The report presents the most detailed blueprint of how a long-term agreement on financial services between the UK and EU might work in preserving the cross-border flow of trading, capital and staff after Brexit.
  • Reuters: UK retail sales fall on year for first time since 2013 as inflation and tough comparison weigh. British retail sales recorded their first year-on-year decline since 2013 last month, despite solid growth in volumes from September, as households battled with fast-rising prices.Britain’s Office for National Statistics said October’s 0.3 percent year-on-year fall in sales volumes was the biggest since March 2013 and reflected a very strong performance by retailers in October 2016. Looking at the three months to October, which smooths out monthly volatility in the data, sales growth picked up to 0.9 percent from 0.7 percent in the three months to September. Compared with a year earlier, however, sales volumes in the three months to October were just 1.1 percent higher than the year before, the weakest growth rate since May 2013.