Morning Report: 4 January 2018

January 4, 2018

GBP Sterling reached a fresh high for the year against the US dollar in the morning, but saw it’s fortunes reverse as the greenback rallied in the afternoon. Yesterday’s main release was the Construction Purchasing Managers’ Index, which fell short of expectations and showed falling commercial activity offset by decent residential building. Today at 09:30 GMT the equivalent Services PMI will be released, representing the largest sector of the UK economy.

EUR The single currency retraced a bit yesterday after it hit the highest point since September on EURUSD earlier in the week. Positive news from the German political arena arrived as the three main political parties currently negotiating to form a coalition government- the CDU, CSU and SPD- produced a joint statement stating that “trust has grown, we’re starting negotiations optimistically” and spelling out that “conditions for tight and effective exploratory talks” to be held at the 7th of January are present. Throughout the morning several national readings of Services PMIs will be released, culminating into a figure for the entire Eurozone at 9:00 GMT.

USD The US dollar found a modicum of solace yesterday and made inroads against a number of the G10 currencies, among others the euro and sterling, after a weak start to the year. The ISM Manufacturing Purchasing Managers Index was more than solid with a reading of 59.7 and held the promise of more good times to come with the leading component new orders being standing out in a positive fashion. In the evening the latest Meeting Minutes of the Federal Open Market Committee showed the Federal Reserve is unconcerned about the flattening yield curve, and does stand ready to tighten faster if inflation suddenly strengthens. Today at 13:15 GMT the ADP estimate of Non-Farm Payroll growth in December is expected to make it to our displays, followed at 13:30 by weekly Unemployment Claims.

CAD The loonie lost some ground against the strengthened US dollar yesterday after it put multi-month highs on the board earlier this week. Brent crude oil reached the highest point since December 2014 and while rising oil prices usually take the loonie by the hand, this did not happen. This afternoon at 13:30 GMT the Raw Materials Price Index will be released.

UK news

  • Reuters: Tony Blair warns British voters – time is running out to stop Brexit folly. Former British Prime Minister Tony Blair on Thursday warned voters that time was running out to reverse Brexit, a folly he said would torpedo Britain’s remaining clout and be regretted for generations to come.
  • Guardian: Fears minimum wage rises will put more jobs at risk of automation. Above-inflation increases in Britain’s minimum wage are putting a growing number of workers at risk of being replaced by machines, one of the country’s leading thinktanks has warned.
  • Daily Mail: Hundreds of thousands of commuters face train chaos next week in three days of strikes just days after massive fare hikes were announced. Hundreds of thousands of commuters are facing travel chaos in three days of rail strikes next week – just days after fare hikes were announced. But talks have been held in a bid to avert some of the strikes planned on the railways next week.

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