Morning Report: 12 April 2018

April 12, 2018

GBP Despite a mixed bag of UK data, sterling had another relatively strong day yesterday furthering gains on both the euro and dollar. The UK Trade Balance deficit reduced significantly due to an increase in services exported to the EU, but Industrial Production fell to 0.1% for February. The recent petering out of the industrial revival in the UK points towards measly Gross Domestic Product growth for 2018 Q1 of 0.2%. This is below the Bank of England’s expectation of 0.3%, which makes a May rate rise less certain than markets currently suggest. 09:30 BST sees the release of the BoE’s Credit Conditions & Bank Liabilities survey.

EUR Euro did a nice snail imitation yesterday as it barely moved against any particular major currency, remaining in the middle of the G10 currency board. This wasn’t helped by sparse Eurozone data and Mario Draghi’s speech at a student award ceremony, which did little to put the single currency in motion. Today holds the promise of the euro being livelier, with Industrial Production at 10:00 BST, European Central Bank Meeting Minutes at 12:30 and ECB’s leading hawk, Jens Weidmann, speaking at 17:00.

USD After persistently weakening during the day yesterday, Federal Open Market Committee Minutes came to the rescue and managed to pare dollar losses in the overnight market. The dollar struggled following a heavy tweet from US President Donald Trump in regards to Syria. Russia claiming it would take down any missiles fired at targets in Syria was all the inspiration Trump needed. He unleashed a barrage of tweets ranging from telling Russia to get ready for new, “smart” missiles, to stating the relationship with Russia is now worse than it was during the cold war. Once again economic data was overlooked as geopolitical tensions took centre stage and markets barely responded to the minor miss in March’s Consumer Price Index coming in at -0.1%. Today we have Import Prices and Weekly Unemployment claims at 13:30 BST.

CAD The Canadian dollar continued its trend of recent strength off the back of rising global oil prices. The global benchmark, ICE Brent Crude, is currently pushing for the $80 a barrel level, of which hasn’t been breached since 2014. This has been a demand driven price rise as the global economy continues to expand, only helped by the stimulus of tensions rising in the Middle East. This will likely provide strength to the loonie since mineral fuels account for over 20% of its exports.

UK news

  • Financial Times: Trump’s new tough line on Russia raises risks. In what has been a dramatic shift in tone, Donald Trump has in the past week ratcheted up pressure on Russia. After spending the first 15 months of his administration facing criticism for being too soft on the country, the US president has changed tack following the poisoning of an ex-Russia spy in the UK and the alleged use of chemical weapons by Syria.
  • Reuters: Britain eyes role in Syria strikes. British Prime Minister Theresa May has called a cabinet meeting to discuss Syria amid reports London is likely to join the Trump administration’s expected military response to the suspected chemical attack in the Syrian town of Douma.
  • Bloomberg: The Growing U.K. Economy Isn’t as Strong as It Looks. One year before the U.K. is to split from the European Union, the economy has avoided the disaster scenarios predicted after the Brexit vote. Don’t get too excited.

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