Morning Report: 09 November 2018

November 9, 2018

GBP. Sterling traded lower against USD but made inroads against the euro yesterday. Various sources reported that Tory Eurosceptics were planning on rejecting a Brexit deal struck by their own Government, even if an “exit clause” for the Irish backstop solution is included. Sterling has enjoyed a decent month already on increased hopes of a Brexit deal, and the headlines serve as a reminder that further dramas are possible as any deal reaches parliament. Today at 09:30 GMT the latest Gross Domestic Product growth figures will be released, after yesterday’s forecasts from the European Commission predicted the UK would be the slowest growing EU economy, tied with Italy.

 

EUR. The euro remained on the back foot yesterday, continuing a week of losses against the US dollar. Yesterday’s European Commission Economic Bulletin was largely in line with the ECB’s own expectations for modest growth and inflation for the euro area. The revision of next week’s Italian Budget plans, on Tuesday next week, continues to be a major theme for markets, with this morning’s news focussing on Italian proposals to raise state benefits.

 

 

USD. After a volatile midterm election, USD strength re-emerged as a theme yesterday, with the dollar making inroads against a broad range of currencies. Last night’s Federal Reserve decision left, as expected, interest rates unchanged, keeping the market’s focus on December as the next likely policy change. The Fed’s take on the economy remained bullish, describing both growth and the labour market as “strong”, and reiterating that further gradual hikes would be necessary. On the political front, Matthew Whitaker was announced as acting Attorney General after his predecessor Jeff Sessions’ resignation. Whitaker was Sessions Chief of staff, and is viewed as a Trump loyallist. Today at 13:30 GMT, the Producer Price Index will be released.

 

 

CAD. The loonie moved sharply lower yesterday as WTI crude entered a bear market and the Keystone XL pipeline was blocked by a US court. Crude oil futures completed a 21% decline from October’s highs yesterday, after a major sentiment shift driven by increased optimism about global growth and increased OPEC output.

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