Morning Report: 10 April 2018

April 10, 2018

GBP Sterling had a mixed day yesterday, notably making gains against the dollar, though seeing little movement against the euro. UK Prime Minister Theresa May met with the Prime Minister of both Denmark and Sweden and was boosted as both Scandinavian allies expressed strong support in favour of an extensive trade deal in Brexit negotiations, alongside an acceptance of the “red lines” that the UK has drawn. Data-wise, the biggest market mover was the release of Halifax’s house price data, showing house price growth of 2.7% for 2018 Q1 compared to that of 2017 Q1. Overnight, the British Retail Consortium’s measure of retail sales showed year-over-year growth of 1.4% for March. However, these figures were driven by Easter falling earlier this year as opposed to last. Today has also seen the announcement of a free trade agreement rollover between the UK and Norway for a post Brexit period.

EUR Despite further data suggesting a slowdown in the Eurozone economy, the euro made minor progress against the pound and a more pronounced gain versus the dollar. European Central Bank President Mario Draghi stated that a slide in the stock market has not affected the Eurozone financial conditions in a speech. Yesterday’s Sentix Investor Confidence survey saw a net negative change in investor’s six-month expectations in the Eurozone, the first dip since the middle of 2016, along with a decline in the German trade surplus.

USD USD remained under broad pressure yesterday and overnight, as Donald Trump said a decision was imminent on further US intervention in Syria and Xi Jinping made a public speech addressing escalating trade tensions between the world’s two largest economies. Stock markets also saw jitters as it was revealed that Trump’s long-serving personal lawyer had his office raided, as part of the ongoing investigation by the Justice Department into a variety of issues. The Congressional Budget Office released its outlook and warned the size of the US national debt would rise to nearly 100% of Gross Domestic Product by the late 2020s, underlining the danger of a “twin deficit” in trade and government spending for the US dollar. Today at 13:30 GMT the Producer Price Index will be released.

CAD Like most major currencies the loonie had a good day yesterday, enjoying an extra boost from an optimistic Business Outlook Survey from the Bank of Canada. Capacity and labour pressured were evident in most regions, investment intentions were widespread, while employment intentions were “solidly positive”. However, it is worth noting firms expected only “modest” acceleration in output price growth. Today at 13:30 GMT monthly Building Permits data will be released.

UK news

  • Financial Times: Xi Jinping speech offers no big concessions to Donald Trump Chinese president Xi Jinping offered no major new concessions in his first high-profile public appearance since China and the US last week threatened to impose punitive tariffs on $100bn worth of bilateral trade flows.
  • The Guardian: US deficit to approach $1tn after Trump tax cuts and spending bill, CBO says The combined effects of Donald Trump’s tax cuts and last month’s budget-busting spending bill is sending the US budget deficit toward the $1tn mark next year, according to a new analysis by the Congressional Budget Office.
  • Bloomberg: Traders Turn Risk-On as U.S.-China Standoff Eases Risk appetite returned to markets on Tuesday after China’s President Xi Jinping struck a conciliatory tone on trade during a major address. Stocks in Asia and Europe rallied and U.S. equity index futures jumped, while established safe-haven assets retreated.

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