Morning Report: 12 March 2018

March 12, 2018

GBP Sterling made inroads on Friday against EUR and USD, closing the week up against both currencies. This week’s calendar is rather sparse, although the monotony will be broken by tomorrow’s spring budget statement from Chancellor Philip Hammond, where he is expected to make some updates to economic and revenue forecasts. Economic growth was stronger than expected in 2017, meaning some minor windfalls may lie in store, although the outlook for this year is considerably murkier.

USD USD is being sold moderately this morning, after an indecisive session on Friday that saw the dollar close flat against the euro, despite a decent print for Non-Farm Payrolls. Payrolls rose a whopping 313,000, more than 100,000 more than consensus forecasts. Average Hourly Earnings growth rose 0.1498%, but as the figures are officially rounded to the nearest decimal place, the change was reported as 0.1% as opposed to the 0.2% expected, making the earnings miss marginal. The US dollar will have an eventful week this week, with inflation figures out on Tuesday, followed by Retail Sales on Wednesday.

EUR The euro is mixed this morning, trading up against USD, CAD, and NOK, but down against NZD. Political uncertainty remains a news theme, with tensions flaring up in peripheral European Union countries in central Europe. Slovakia is still seeing massive protests against its government after a journalist who investigated ties between Slovak politicians and Italian mafia was slain. Elsewhere, last week the Parliament of the EU voted in favour of punitive steps against Poland after it enacted controversial reforms of its judiciary system and state media. The Eurogroup of finance ministers will meet today, European Central Bank President Mario Draghi will speak on Wednesday. The Final Consumer Price Inflation figures for February are published on Friday.

CAD The loonie closed stronger against USD on Friday after a week which saw the highest USDCAD levels since July. The drivers for Friday’s CAD rally included higher crude prices, the prospect of tariff exemptions, and solid labour market data. On Tuesday Bank of Canada Governor Stephen Poloz delivers a speech about today’s labour market and on Friday new data on Foreign Security Purchases will be released.

UK news

  • Reuters: UK consumer spending suffers weakest start since 2012 – Visa. British consumers tightened their belts in February, giving the weakest start to the year since 2012, figures from payments company Visa showed on Monday, raising the prospects that the broader economy will slow in the first quarter of 2018.
  • Reuters: ‘No deal’ Brexit could cost UK, EU companies 58 billion pounds – report. Companies in Britain and the European Union face an extra 58 billion pounds in annual costs if there is a no-deal Brexit, with Britain’s vast financial sector set to be the worst-hit industry, according to a report on Monday. Firms across the EU’s 27 countries other than Britain will have to pay 31 billion pounds a year in tariff and non-tariff barriers if Britain leaves the bloc without a deal, the report by Oliver Wyman management consultants and law firm Clifford Chance said. In return, British exporters to the EU will have to pay 27 billion pounds a year.
  • Politico: Trump targets European car-makers with big plants in states he won. President Donald Trump, expressing his ire over trade imbalances this weekend, made a peculiar choice: He focused his criticism on two European brands, BMW and Mercedes-Benz, that have significant investments in two of the nation’s most Trump-friendly states. “Open up the barriers and get rid of your tariffs,” Trump said of the European Union’s trade policies in a wide-ranging and rollicking address in Pennsylvania Saturday. “And if you don’t do that, we’re going to tax Mercedes-Benz, we’re going to tax BMW.”

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