Morning Report: 21 February 2018

February 21, 2018

GBP Sterling showed its heels to euro and other major currencies, but at the end of the day closed marginally lower against USD. Prime Minister Theresa May is facing another head of the Brexit hydra as hard Brexiteers in her Conservative Party demand a clean Brexit. The 62 backbenchers call Theresa May to reconsider her plan of a two year transition period, potentially asking her to make negotiation demands which Brussels will be hesitant to meet to say the least. Today at 9:30 GMT we have the labour market data, which apart from the Unemployment and Claimant Count Change, will also tell us how well the vital Average Earnings growth has kept up with the high inflation.

USD The greenback was on a roll yesterday versus the rest of the G10 currencies, with the rising short term treasuries the likely cause for this move. US Special Counsel Robert Mueller found another culprit willing to plead guilty. A Dutch lawyer admitted he misled courts in Washington about contacts with Ukrainians on behalf of former Trump campaign chairman Paul Manafort and his deputy, Rick Gates. Tonight at 19:00 GMT we have the Federal Open Market Committee Minutes that cover the first monetary policy meeting the new Federal Reserve boss Jerome Powell chaired.

EUR The single currency slipped in slow motion against the US dollar yesterday and is facing renewed pressures this morning, while the picture against other currencies was more mixed yesterday. Eurozone Consumer Confidence missed the mark yesterday, just like the French Purchasing Manager Indices this morning, although the German ZEW Economic Sentiment was strong. Throughout the morning several PMIs are published, culminating in the composite Eurozone flash PMI at 9:00 GMT

CAD The loonie lost ground against USD yesterday, a move which is continued this morning and has sent USDCAD to the highest level in 7 weeks. December Wholesales proved no ally to loonie strength as it shrank 0.5% in the month, while an expansion was expected. The dipping oil prices then only made matters worse for the Canadian coinage. Today no Canadian data is released.

UK news

  • TRT World: German Social Democrats begin voting on proposed Merkel coalition Members of Germany’s Social Democrats (SPD) start voting on whether their party should enter a new coalition with Angela Merkel’s conservatives in a postal ballot on Tuesday which could scupper the chancellor’s fourth term. The result of the vote, which runs to March 2, is wide open and will be announced on March 4. Polls indicate a majority of SPD supporters back the deal, but in the absence of any internal surveys it is unclear whether its members feel the same way.
  • Bloomberg: May Facing Tory Demand for a Clean Brexit The proposed split from the European Union just isn’t decisive enough or quick enough, 62 Conservative lawmakers told May in a letter released last night. Included in their list of demands is the scrapping of the post-Brexit transition phase in the way it’s currently envisaged, which would essentially see the U.K. remain shackled to the EU without any say over decision-making until the end of 2020, and instead have a period that gives Britain much more flexibility.
  • NPR: Special Counsel Robert Mueller Secures Another Guilty Plea There is another guilty plea in special counsel Robert Mueller’s investigation into Russian interference in the 2016 election. This time it’s a lawyer who worked with former Trump campaign chair Paul Manafort and his business partner Rick Gates. That lawyer, Alex van der Zwaan, has acknowledged that he lied to the FBI last year. He’s the 19th person charged by the special counsel and the fourth to plead guilty.

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