Morning Report: 1 March 2018

March 1, 2018

GBP Sterling sold off heavily yesterday, as the latest Brexit drama unfolded. The European Union released a draft treaty that contained a fallback provision for Northern Ireland that would see the province essentially remain a part of the single market- if another means of avoiding a hard border in Northern Ireland could not be found. The usual posturing and indignation was heard from both sides in negotiations. Theresa May claimed the draft undermined the integrity of the UK, while Michel Barnier argued the draft was simply what was agreed last year when a deal was struck to move talks on to their second stage. The possibility of a serious collapse or regression in talks seems to have increased, hence the pressure sterling has been under. Manufacturing Purchasing Managers’ Index data will be released today at 09:30 GMT, alongside Money Supply data from the Bank of England.

EUR The Euro struggled against USD yesterday and eventually had to throw in the towel, while this morning its trading more or less flat against the greenback. French Consumer Spending in January and February Consumer Price Index took a hit in, while the Eurozone CPI flash estimate came in exactly at expectations at 1.2%. This morning a string of Final PMIs for the month of February are released throughout the morning, which may confirm the weakening readings we saw earlier in the month. The Eurozone Unemployment figure is published at 10:00 GMT.

USD The greenback continued to pick up momentum yesterday, rising to its strongest point against the single currency since January. A large contraction in Pending Home Sales did little to dent the dollar’s progress. A raft of data will be released this afternoon, including the important Personal Consumption Expenditures Price Index and weekly Unemployment Claims at 13:30 GMT. Incoming Federal Reserve Governor Jerome Powell will also testify for the second time this week at 15:00, this time to the Senate Banking Committee. Construction Spending and Manufacturing Purchasing Managers Index data will also be released at this time, and Total Vehicle Sales will be released throughout the day.

CAD The loonie had yet another off day, which put it back to levels last seen in December against USD, although its performance against other currencies was less dire. The Federal Budget released on Tuesday remains dominant in Canadian media. The government takes pride in the fact they dare to make investments in Canada and its citizens, while the budget also receives critiques of conservative who consider the intended fiscal spending irresponsible. Meanwhile the Raw Material Price Index grew a hefty 3.3% in January. Today at 13:30 GMT the Current Account is released.

UK news

  • Reuters: EU’s Tusk warns of hard border in Ireland after Brexit. European Council President Donald Tusk warned Britain on Thursday that its plan to leave the EU’s customs union and single market on Brexit could mean a return to a “hard border” on the island of Ireland.
  • Telegraph: Remainers are trying to stop Brexit with a proxy war, say Boris’s allies, as former PMs hint at second referendum. Boris Johnson believes the Irish border is being used by Remainers to fight a “proxy war” to thwart Brexit as two former prime ministers raise the prospect of a second referendum.

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