Morning Report: 14 November 2018
November 14, 2018
GBP. It’s a big day for Theresa May today, as she rolls the dice by airing the proposed divorce deal from the EU, and hopes that her Cabinet doesn’t use the event to divide and conquer her leadership. Around 14:00 BST today the Prime Minister will hold her third Cabinet meeting of the week. In today’s meeting, May will look for the support of top Tory lawmakers before putting a deal in front of Parliament and the EU 27 to be voted upon. Sterling’s appetite for Brexit news and developments remains high, and will likely see today’s 09:30 Consumer Price Index release brushed to the side ahead of this afternoon’s main event. Eurosceptics have heavily voiced their disapproval of the deal overnight, saying a Brexit In Name Only (BRINO for short) deal is unacceptable and will be shot down in Parliament should it reach the House of Commons. Regardless, the last 18 months of Brexit negotiations seemingly boil down to this moment that could be the making or breaking of May and a new direction for sterling.
EUR. Euro recovered somewhat yesterday from the 17 months low reached against the dollar on Monday, with no obvious data release or political development offering itself as a convincing driver for this. German ZEW Economic Sentiment came in virtually in line with expectations, showing that the worsening in sentiment may have stabilised and didn’t deteriorate further due to the equity sell-off seen in October. The Roman empire may have experienced problems due to revolting provinces, but now the Italians slipped into the role of defiant rebels themselves as the country refused to adept its budget before the deadline set by the European Union yesterday. Brussels may now hit back with financial sanctions, which can actually play into the hand of the current government, as this would strengthen the wave of anti-EU sentiments in Italy they are riding. This morning the second Reading of Germany’s third quarter Gross Domestic Product showed a contraction of -0.2%, highlighting that risks to growth for the Eurozone remain tilted to the downside. The Eurozone-wide reading is out at 10:00 GMT.
USD. The dollar lost out to the whole G10 currency board yesterday as the dollar takes on water from a rallying euro and sterling. Both are two of the main components of the dollar DXY index, which is a weighted index of the dollar against its major trading partners, and their rallies saw the dollar fall from its recent 16-month high. The slump in oil prices generally benefits the greenback, and the oversupply in the market continues to put downward pressure on WTI thus adding a layer of support for the greenback. October’s Consumer Price Index reading is on the calendar for the US at 13:30 BST today, with a rise to 2.5% year-on-year expected.
CAD. WTI crude oil entered an official bear market after prices dropped by 7% yesterday, which added to a record losing streak of 12 days of losses in a row. That concerns over oversupply and diminishing global demand have oil markets shaken seems a bit of an understatement, but the loonie kept a cool akin to Britain’s most famous spy agent and wasn’t even stirred. CAD even gained marginally against USD despite the biggest drop in oil prices in one session in three years.