Morning Report: 2 November 2018

November 2, 2018

GBP. Sterling was the G10 currency to watch yesterday, as Brexit progress and a hawkish Mark Carney spurred the rally onwards. Eventually, GBPUSD rallied 1.93% with sterlings gains against the euro capped at just above 1% due to EURUSD benefitting from dollar weakness too. Despite a denial from the UK government that a deal had been reached with the EU on financial services, markets continued to buy back into the pound throughout the day. Furthermore, Governor of the Bank of England, Mark Carney, gave sterling some extra juice to continue its long journey up yesterday afternoon. The BoE Governor stated that given a smooth Brexit transition interest rates will have to start rising as inflationary pressures remain high. Carney also stressed the impact a no-deal Brexit would have on the UK economy. Yesterday’s central bank meeting added additional upside to sterling given a favourable deal was put on the table.

EUR. The euro experienced its strongest rally since May yesterday as it pounced on the dollars broad weakening and pared losses on EURUSD made earlier this week. Data wise it was a slow day for Eurozone yesterday, with most of continental Europe enjoying a bank holiday. This morning October Manufacturing Purchasing Manager Indices for the bloc’s member economies are released, with Italy’s Index standing out in a negative way as it signals a contraction in activity with a score of 49.2.

USD. The dollar began to take on some water yesterday despite hitting a fresh year high this week. Trump announced late on in the evening that negotiations with China were “moving along nicely” and news broke this morning that he has asked cabinet to draft a possible trade deal with China. However, this may just be a ploy to boost equity prices just days before the mid-term elections next week. Equity markets have begun to rally in Asia due to the easing of trade-tensions, with the dollar and JPY selling off this morning. The dollar generally suffers as trade tensions lapse, and this is the case this morning ahead of this afternoon’s Non-Farm Payroll release at 12:30 GMT.

CAD. The loonie continued to benefit from a weakening greenback yesterday; a trend that hasn’t been bucked this morning. This afternoon, Canadian unemployment data looks to compound Wednesday’s positive GDP release. Hourly earnings are expected to increase to 2.3% in October whilst the unemployment rate continues to remain static at 5.9%.


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