Morning Report: 14 February 2018

February 14, 2018

GBP Sterling took advantage of yesterday’s dollar weakness, but it’s downwards trend against the euro was interrupted only by a short lived burst of strength after the release of better than expected inflation data. Year on year Consumer Price Index inflation remained at 3%, defying expectations for a slight fall. Although price increases were broad based as they have been in recent months, higher zoo admissions were an outlier identified by the Office for National Statistics. House prices also rose a healthy 5.2% year on year. Today at 14:30 GMT the Conference Board’s Leading Index, a composite of various forward looking data series, will be released.

EUR The euro rose steadily throughout the day yesterday, and has extended its gains this morning. This morning will see a raft of european data releases, including German Gross Domestic Product and Consumer Price Index inflation. German GDP grew 0.6% in the fourth quarter of 2017, as expected, while prices rose 1.4% year on year in January. Dutch GDP beat expectations in Q4, rising 0.8%. At 10:00 GMT eurozone Industrial Production figures will be released alongside updated GDP.

USD After a somewhat promising start to the week, USD came under broad pressure yesterday, and found little respite overnight. There was little in the way of a clear driver, but it is worth noting equities performed reasonably well, while US sovereign bonds also continued their rally from Monday. The NFIB Small Business index was released, showing a notable spike in confidence among the surveyed businesses following the recent tax reforms, and also a high percentage of businesses reporting difficulties with hiring qualified staff. Today at 13:30 GMT crucial Consumer Price Index data will be released alongside equally important Retail Sales figures.

CAD CAD was flat against USD yesterday, but has come under pressure elsewhere as crude oil prices have continued to fall this week. As with yesterday the loonie calendar is woefully barren today.

UK news

  • FT: South African police arrest 3 in raid on Zuma allies Police raided the home of South Africa’s powerful Gupta business family on Wednesday amid a stand-off between President Jacob Zuma and the ruling African National Congress that has ordered him to resign.
  • Reuters: UK firms plan to raise pay by 3.1 percent in 2018: BoE survey British businesses plan to offer staff bigger pay rises this year due to a higher minimum wage and staff shortages, according to a Bank of England survey which is likely to feed the central bank’s concern about growing domestic inflation pressures.
  • Bloomberg: Europe Has a $1.2 Trillion Bad-Loan Problem For European banks, it’s a headache that just won’t go away: the 944 billion euros ($1.17 trillion) of non-performing loans that’s weighing down their balance sheets. Economists say the pile of past-due and delinquent debt makes it harder for banks to lend more money, hurting their earnings. European authorities are prodding lenders to sell or wind down non-performing credit, but they’re split on how to tackle the issue, and some investors are disappointed by the pace of progress.