Morning Report: 23 November 2018

November 23, 2018

GBP. Sterling shot up yesterday as the UK and EU agreed on a draft declaration for a Brexit deal that would see an “ambitious, broad, deep and flexible partnership” and the possible removal of the contentious Irish backstop solution. The deal is set to be agreed on by all EU 27members bar Spain as it currently stands. A speedbump in progress remains due to no explicit reference regarding Gibraltar’s future trading relationship post-Brexit and has led to opposition from the Spanish Prime Minister. Regardless, sterling has held yesterday’s 0.77% gains but questions still loom on May’s ability to get a deal through Parliament as yesterday’s developments will likely incur a political backlash from the Eurosceptic faction.

EUR. EUR traded up yesterday for the second day in a row and is back again where it started the weak, after a sharp drop on Tuesday. Eurozone data was mixed yesterday, with French Business confidence showing a welcome rebound in November which is a positive omen for French Industrial Production three months from now. Consumer Sentiment meanwhile continued to trend lower in the Eurozone and fell to -3.9 in November, pointing to a slowdown in Retail Sales in the future. Flash Purchasing Manager Indices will be released throughout the morning, with French figures at 8:15 GMT, German data at 8:30 and the Eurozone-wide reading scheduled for publication at 9:00.

USD. The dollar stemmed any major moves from the G10 currencies, except sterling, as it enjoyed a day with the family over a bronzed Turkey crown. With no US data on the calendar for today market participants may have some moments to take their eyes from their screens and do some Black Friday online shopping instead.

CAD. Today marks the first major data release for the loonie in around two weeks with the double whammy of CPI inflation data and Retail Sales released at 13:30 GMT. With the recent decline in oil prices throwing the Bank of Canada’s hiking cycle into question, today’s release of October’s Consumer Price Index will prove crucial in determining the direction of monetary policy. The CPI is looking for a rebound after two months of decline, although, of course, the recent fall in oil prices isn’t supportive to this.

FX elsewhere: The South African Reserve Bank took half of the market by surprise by hiking rates yesterday in order to pin down inflation expectations. The vote was split 3-3, which had Governor Lesetja Kganyago bringing the decisive vote. Kganyago said that risks to the long-term inflation remain to the upside, which prevailed over concerns about growth. The SARB governor remarked that it’s mostly to the government to get its house in order and fix structural problems in the economy, while the central bank focuses on price stability.

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