Morning Report: 7 November 2017

November 7, 2017

GBP Sterling traded higher against USD and EUR yesterday, as political headlines dominated the news cycle and little headline UK data was released. New Car Registrations fell for the seventh consecutive month in October, registering a 12.2% year on year fall, according to the Society of Motor Manufacturers and Traders. Typically, consumers may delay big ticket purchases such as cars in a climate of economic uncertainty. Official UK Retail Sales remain in growth overall on a year on year basis, for now at least, but this morning’s data has included a surprise fall in the British Retail Consortium’s Retail Sales Monitor for October.

EUR The euro has had an eventful start against USD this week, weakening throughout yesterday morning and afternoon before rallying in the evening – only to give up the same ground yet again this morning. Yesterday’s data included Sentix Investor Confidence, which rose sharply to 34.0, as the surveyed investors reported levels of confidence consistent with an economic boom. Producer Prices, in the meantime, rose 0.6% in September. This morning’s data has included the eurozone Retail Purchasing Managers Index, which showed a score of 51.1, slightly lower than expected. Later in the morning, hard Retail Sales figures will be released.

USD The US dollar reached its strongest level against the euro since mid-July, while giving up ground against sterling and commodity linked currencies. Elsewhere, bond market volatility sank to record lows as markets wait for more information about the likely approach of newly nominated Fed chair Jerome Powell, and potential changes in fiscal policy due to tax reform. This afternoon at 15:00 GMT we have the Job Openings and Labour Turnover Summary. Tonight at 19:30 GMT Janet Yellen is due to deliver her first public speech since not being renominated as Fed chair.

CAD The loonie closed higher against USD on the back of strong domestic data and surging oil prices. Politics had an influence on crude and loonie yesterday, as political reshuffling in Saudi Arabia sent the price of crude oil to a two year high and boosting CAD. Besides getting a boost from high oil prices, the Ivey Purchasing Managers Index was stronger than last month and beat expectations with a score of 63.8, the highest level since February 2016. Bank of Canada Governor Stephen Poloz will speak about inflation tonight at an event organised by the Chartered Financial Analysts Society at 17:55 GMT.

UK news

  • Reuters: UK retailers suffer worst October since 2008. British retail spending fell last month at the fastest pace for any October since 2008 as consumers curbed purchases of non-food goods in the face of rising inflation, a survey showed on Tuesday. Retail sales values slid by an annual 1.0 percent on a like-for-like basis, which strips out changes in store size, the British Retail Consortium (BRC) said, compared with a 1.9 percent rise in September. Another survey from payments company Barclaycard (BARC.L) also showed weak consumer spending, with a similar split between spending on essentials at the cost of spending on discretionary items. Last week, the Bank of England raised interest rates for the first time in more than 10 years.
  • FT: Dublin calls for 5-year Brexit transition period.  Coveney rails against ‘game of chicken’ as Irish concerns of collateral damage mount. Ireland has called for a transition period of up to five years after the UK leaves the EU in March 2019, in a sign of Dublin’s mounting concern that it will suffer collateral damage from Brexit. Simon Coveney, Irish foreign minister, also told the Financial Times in an interview that it was “not realistic” to agree a fully fledged UK-EU free-trade deal next year, even though Theresa May, Britain’s prime minister, has set out just such a goal.