Morning Report: 13 December 2017

December 13, 2017

GBP Sterling had a volatile session yesterday, ultimately closing lower after several intraday swings, one of which included a brief patch of strength spurred on by the morning’s inflation data. November’s inflation data has showed prices increasing in the UK economy by a sliver more than expected. Headline CPI was 3.1% year on year, compared to 3% previously and a median forecast of 3%. The increase was broad based among the various categories. The figures did not come as a surprise, as ultimately the Brexit shock is still working its way through consumer and business behavior. What’s important is that inflation is not expected to accelerate much further from where it is today; if it does continue rising in to 2018, then the BoE will ultimately be forced to react. Yesterday’s Brexit related news included EU Parliament negotiator Guy Verhofstadt publicly admonishing David Davis for suggesting the deal agreed last week was not binding, which triggered a short lived sterling sell off. Today at 09:30 equally important labour market data including the Unemployment Rate will be released.

EUR The euro reached a fresh low against USD yesterday, and after a brief rally yesterday evening is back on the defensive. Weak survey data was released in the morning, with the ZEW Economic Sentiment missing expectations for both the eurozone and Germany. Today’s calendar is marginally more eventful, having already seen German monthly Consumer Prices and Wholesale prices expand at a rapid rate in November, with wholesale prices expanding 0.5%. Italian Industrial Production will be released at 9:00 GMT, followed by eurozone Unemployment and Industrial Production at 10:00.

USD The US dollar saw minor gains versus sterling and euro, and mixed results against other G10 currencies. The Democrat Doug Jones triumphed in the traditionally deep red state of Alabama, putting a Democrat on the chair of Senator in this state for the first time in 25 years. This brings the majority that Trump has in the Senate back to 51 against 49, which may handicap his abilities to get any future infrastructure deal past the Senate. The Core Producer Price Index surprised on the upside and showed the fastest month on month increase in prices in 6 years. This afternoon we have the US Consumer Price Index at 13:30 GMT followed in the evening by a rate announcement from the Federal Open Market Committee and Janet Yellen’s swan song in her last FOMC press conference as Fed chair. Yellen’s presser will be accompanied by updated member projections for growth, inflation, and interest rates.

CAD The loonie saw some dramatic swings yesterday, weakening in the afternoon, only to rally overnight, leaving it trading close to the opening quote it had against many G10 currencies yesterday morning. A broken oil pipeline in the North Sea and an Austrian gas hub explosion boosted oil prices, but the gains were short lived and prices later fell back with the loonie. Weekly Crude Oil Inventory data for North America will be released at 15:30 GMT.

UK news

  • Reuters: Exclusive – After Grenfell fire, same builders rehired to replace dangerous cladding, Reuters finds. LONDON (Reuters) – Some building companies that installed dangerous cladding on social housing blocks across Britain are now winning new contracts following the Grenfell Tower blaze to remove their original work and install panels that can pass safety tests, a Reuters review shows.
  • Telegraph: New current account rules will not help consumers save money, critics say. New rules set out by the City watchdog aimed at helping customers compare bank accounts have been condemned by consumer groups for not going far enough and failing to help people save money.

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