Morning Report: 13 February 2018

February 13, 2018

GBP Most of the major currencies had a slow start to the week yesterday, as sterling traded flat against USD and weakened slightly to the euro. This morning’s key event is the release of Consumer Price Index figures from the Office for National Statistics. The monthly figure has been teetering around 3.0%, and although it was expected to fall slightly has remained at this level. Core inflation, which excludes volatile items such as fuel, also beat expectations and is up 2.7%.

EUR The euro closed higher against USD yesterday after seeing some intraday volatility, and has extended its gains this morning, amid broad USD weakness. Euro news flow was uneventful, and remains so this morning, aside from ongoing tensions about the newly struck deal for a coalition government in Germany, with Angela Merkel’s prospective coalition partners due to begin polling their members on the deal next Tuesday. This morning’s main data release has been French payrolls, which expanded 0.3% in Q4.

USD USD has come under pressure this morning, after the White House released an updated budget proposal yesterday. The proposal included $200bn in infrastructure spending, increased military spending, and relies on very optimistic growth projections while taking a decade to bring the federal government into balance. Although the proposal is a wish list, the prospect of increased spending at a time of low unemployment and sustained growth is unprecedented in recent fiscal and monetary history. This morning at 11:00 GMT the NFIB small business index will be released, followed at 13:00 by a speech from the Fed’s Loretta Mester.

CAD The loonie traded flat against USD yesterday, and has lagged the rest of the G10 currencies in making progress against the greenback this morning. After a brief rally in the afternoon, crude oil prices traded flat on the day, offering little support to the loonie.

UK news

  • Reuters: UK inflation proves stickier than expected at start of 2018. British inflation unexpectedly held close to its highest level in nearly six years in January, highlighting the challenge the Bank of England will face as it tries to return price growth to target over the next two years.
  • Guardian: EU endgame is political unity not free trade, argues Boris Johnson. The founding fathers of the European Union did not create the common market to tear down barriers to trade but to pursue a political project, Boris Johnson will argue this week, in a speech setting out what he claims is a liberal vision for Brexit.

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