Morning Report: 11 April 2018

April 11, 2018

GBP The pound was the biggest winner against both the dollar and euro yesterday as it started the day fairly positively due to the announcement of a post Brexit free trade deal between Norway and the U.K. Gains against the euro weren’t as pronounced as the euro clawed back some ground following the European Central Bank’s Ewald Nowotny commenting that the ECB could raise its deposit rate to -0.2% by the end of the year. 9:30 BST sees the release of UK trade balance and manufacturing production data.

EUR Yesterday was mixed for the euro, with the quietness of the morning trading session suddenly disturbed by a brief surge of euro strength after hawkish comments by Ewald Nowotny of the European Central Bank. He stated that the ECB has the option to increase the deposit rate from -04% to -0.2% as the first step towards hiking rates, while it should also stop purchasing bonds in 2018. Today at 12:00 BST Mario Draghi ascends the stage to address at a student award ceremony, which is unlikely to involve deep, technical questioning about the future of the Eurozone’s monetary policy.

USD The greenback came under broad pressure yesterday but managed to fend off haven currencies like JPY and CHF. Ostensibly conciliatory statements by Chinese President Xi Jinping about slowly removing Chinese tariffs echoed through markets, which reduced the perceived risk of a trade war and gave a huge boost to global equities and oil. Tensions around Syria rose after the US and Russia exchanged barbs about possible interventions after the Syrian army allegedly executed a chemical weapon attack. US Producer Prices rose 0.3% in March but remained sidelined in the shade of so many global developments. Today economic and central bank events may reclaim the limelight again with the Consumer Price Index at 13:30 BST and Federal Open Market Committee Meeting Minutes at 19:00.

CAD Rising crude prices took the loonie by the hand yesterday as oil was up more than 3% and led the loonie to make inroads against USD for the second day in a row. Despite the recent sharp decrease in volumes of housing sales, Housing Starts remained firm and surprised slightly to the upside at 225k in March. However, the more established leading indicator, Building Permits, declined more aggressively than anticipated with a 2.6% fall in March.

UK news

  • Financial Times: UK businesses call for post-Brexit alignment with EU regulations Large swaths of the economy will be damaged if the UK deviates too far from EU regulations after Brexit, according to a new report from the CBI business lobby.
  • Bloomberg: China Adds Flesh to Bones of Plan for Big Bang Financial Opening China’s plan for a historic opening of its financial sector came into sharper focus as the nation’s top central banker elaborated on pledges from President Xi Jinping that have buoyed global markets and eased trade tensions with the U.S.
  • Reuters: Eurocontrol warns airlines of possible missile strikes into Syria Pan-European air traffic control agency Eurocontrol on Tuesday warned airlines to exercise caution in the eastern Mediterranean due to the possible launch of air strikes into Syria in next 72 hours.

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