Morning Report: 7 December 2017

December 7, 2017

GBP Sterling’s woes continued yesterday, as the latest impasse in Brexit talks appeared to stretch on. Brexit chief David Davis said in testimony to the Select Committee that the Government had not yet done a quantitative assessment of the economic impact of “hard Brexit”, while no progress was announced on the crucial issue of the Irish border. This morning’s papers are reporting that Michel Barnier has told member states that the UK must agree a draft text for a deal on divorce payments and the Irish border within the next 48 hours, or face delaying progress on moving the the next phase of negotiations until next year. Politics will remain the main driver for sterling today, with no major releases to come.

EUR In the absence of major headlines the single currency traded down against most of the G10, and reached its lowest point against the US dollar in two weeks. German Industrial Production came out this morning, showing a drop of 1.4% month-on-month, far worse than the expected 0.9%. Later this morning at 10:00 GMT the final reading of the Q3 Gross Domestic Product will be published by Eurostat, and at 16:00 European Central Bank President Mario Draghi speaks on a forum run by the Bank of International Settlements.

USD For the fourth day in a row the US dollar made inroads against the euro, while other G10 currencies also struggled against the greenback. In a new episode of Trump turmoil the US president revealed his plans to move the US Embassy in Israel to Jerusalem and to, de facto recognise it as the capital of Israel. The move is potentially destabilising for the region, and comes at a time when tensions between the Iranian backed militia Hezbollah and Saudi Arabia are at an all time high. This afternoon at 13:30 GMT the latest data on Unemployment Claims in the US will be released.

CAD The loonie lost some value against the other major currencies after the Bank of Canada kept its main interest rates unchanged and issued a cautiously worded statement, suggesting that market participants were expecting at least a remote probability of a hawkish change yesterday. Today at 13:30 GMT monthly building permits will be released, followed at 15:00 GMT by the latest Ivey Purchasing Managers’ Index.

UK news

  • Reuters: Exclusive – EU parliament details UK concessions on rights. BRUSSELS (Reuters) – Britain will guarantee rights for as yet unborn children who join EU parents after Brexit and accept EU judges’ rulings on such rights, according to a draft European Parliament resolution seen by Reuters on Thursday.
  • Guardian: David Davis escapes MPs’ criticism over lack of Brexit assessments. David Davis escaped censure from MPs after the Brexit committee split on party lines over whether to formally criticise him, following a chaotic appearance in which he said that dozens of economic impact assessments he had been told to publish did not, in fact, exist.
  • Telegraph: Britain must return to war zones in Middle East, says Boris Johnson. Britain must dare to step back into some of the world’s most intractable conflict zones in the Middle East to avoid decades of further terror and instability, Boris Johnson will say on Thursday.

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