Morning Report: 17 July 2018

July 17, 2018

GBP.  Sterling shrugged off the public dissidence by some of the Conservative party in the morning of yesterday’s session ahead of the key vote on amendments to the customs bill in parliament. Former cabinet members, Boris Johnson and David Davis, took to the broadsheets to voice their disapproval of the soft Brexit ambitions of the current government, while Justine Greening called for another referendum to truly understand the mood of the public. As the day wore on, news slowly filtered out that May would concede to the Brexiteer amendments in order to stem a Tory revolt and sterling’s rally began to taper. Ultimately, both May and sterling conceded to the demands of the Brexit hard-liners within the Conservative party, and amendments over EU tax collection, VAT and the Irish border “backstop” were accepted. Sterling eventually kept its head above water, making only 0.1% on the dollar open-to-close in a day where the dollar made broad losses. Today, unemployment data and wage growth data are released for May, with the ILO measure of unemployment expected to hold steady at record lows of 4.2% while wage growth is expected to slump from 2.8% to 2.7% when excluding bonuses.

EUR. The euro was blind to macroeconomic data releases yesterday, trading in a relatively tight range against the dollar. However, the euro ended yesterday’s session up 0.22% against the greenback. This move came despite the release of May’s trade balance showing the Eurozone’s trade surplus moderated from €18.0bn to €16.9bn – a 15-month low. Exports grew by 0.2% in May, but the 0.9% rise in imports negated this increase. Net exports dragged slightly on the Eurozone’s Gross Domestic Product reading for Q1, and with trade tensions likely to impact the Eurozone’s trade balance in the coming months along with the lagged effect of a stronger euro, Q2’s GDP reading may also be tarnished by the trade balance moderation.

USD. The greenback experienced broad losses against the G10 currencies yesterday, with only the Aussie dollar conceding ground to the global currency. The dollar composite DXY index slumped for a second day yesterday, whilst it shows the dollar started off today’s session on the back foot. As Donald Trump met with his Russian counterpart Vladimir Putin in Helsinki, which raised eyebrows, given that the FBI has previously found evidence of interference from Russian’s during the 2016 election. The complete rejection of Russia’s involvement in the election by Trump caused many friends and foes across the pond to join together to voice their disapproval of the US president’s actions. The release of Junes retail sales did little help the greenback, posting a moderation in growth from 1.3% to 0.5%, whilst core Retail Sales fell from 1.3% to 0.3%. Today, industrial production figures are released with a rebound in growth from -0.1% to 0.5% expected.

CAD. Uncertainty over future oil production cleared, with supply shifts in Libya, Saudi Arabia and Iran looking like it may cause a 300,000 barrel-per-day surplus in August. Announcements from the Trump and Putin summit that the US and Russia will bridge possible supply shortages added to the moderation in crude, with WTI crude falling nearly 3.5% to under $70 a barrel. Despite this, the loonie managed to make ground against the depreciating greenback. With little data released this week, the loonies direction will be based upon broad dollar moves, until the Consumer Price Index measure of inflation is released on Friday.

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