Morning Report: 24 September 2018

September 24, 2018

GBP. Sterling had a volatile week, with GBPUSD falling the most in one day this year on Friday off the back of Theresa May’s stern speech demanding respect from the EU. Investors repriced in the possibility of a no deal Brexit, which was arguably forgotten about in a week of strong economic data out of the UK. Friday’s speech reversed sterling’s rally, losing all of its gains from last week against the dollar. With the Labour Party Conference set to spill over into today, comments from Labour leader Jeremy Corbyn regarding Brexit may set sterling off on another rollercoaster of a day. Polls show that 86% of Labour members want a second referendum on any Brexit deal that comes to fruition and with high profile Labour members such as the Mayor of London Sadiq Khan advocating this stance too, Corbyn may be forced to pressure the Tory government later today.

EUR. Autumn officially started last Friday and the single currency immediately shed some basis points against most major currencies, although over the week the euro was still up firmly against GBP and USD. The Eurozone Flash Purchasing Manager Indices for September were soft, with a decrease in new orders and the backlog of jobs weighing on the score of the manufacturing sector. The report also noted the difference between northern Europe and southern Europe increased further, with northern economies outpacing the scores of countries like Spain and Italy, indicating that the phenomenon of “two-speed” economic growth between different economies within the Eurozone is rearing its head again. This week European Central Bank President Mario Draghi appears on the economic calendar both today at 14:00 BST and on Wednesday, with the Flash Consumer Price Index being published on Friday.

USD. Geopolitical tensions shift this week for the dollar with the UN general assembly meeting on Tuesday. Much of the focus will be on Wednesday when the UN Security Council meets, chaired by the US President Donald Trump. US ambassador to the UN, Nikki Haley, previously stated that the Security Council meeting will focus on Iran’s violations of international law, as the prospect of a US-Iran war increases. Ms Haley also stated that this will likely be the most watched Security Council meeting ever. Data-wise, the Federal Reserve will release their monetary policy decision Wednesday evening, where they are highly expected to raise rates another 25 basis points, and the final reading of Q2’s Gross Domestic Product is released on Thursday. With a rate hike for December priced in almost 80% markets will try to pan out hints from the Fed’s communications about how certain this rate hike really is, with the most recent inflation readings being slightly soft, but the trend remaining solid after all in a booming economy.

CAD. The loonie had a fairly quiet end to the week despite Retail Sales and the Consumer Price Index measure of inflation being released. Both CPI and Retail Sales came in on expectations at 2.8% and 0.3% respectively. Increase chatter over a $100 barrel of oil between analysts has resurfaced again as tensions rise between the US and Iran. With Trump recently calling on OPEC to increase production again, prices may begin to rise with tensions.

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