Morning Report: 14 November 2017

November 14, 2017

GBP Political turmoil finally began to weigh on sterling yesterday, leading to losses against EUR and USD. The UK’s chief Brexit negotiator David Davis spoke in the House of Commons yesterday and tried to appeal to Tory backbenchers when he told the parliament will be allowed to vote on the final Brexit deal coming out of the negotiations. Today at 9:30 BST the Consumer Price Index and the Producer Price Index will be made public. Bank of England Mark Carney will speak at 10.00 BST at the ECB conference in Frankfurt, alongside the Bank of Japan’s Kuroda and Mario Draghi of the European Central Bank.

EUR After a quiet day yesterday, the euro enjoyed a modicum of strength this morning against the greenback based on some smashing German data. The first reading of the GDP jumped to 0.8% in the third quarter, bringing year on year growth. A solid reading in the final quarter might bring the German growth close to a scorching 3% annual growth. At 10.00 BST we will see the flash GDP reading for the entire eurozone, the ZEW Economic Sentiment survey and Mario Draghi speaking at a central bank communications conference hosted by the European Central Bank in Frankfurt.

USD The weighted USD index DXY traded more or less flat on the day yesterday, though gains made against sterling stood out. The Republican Party continues to attempt to make progress on reconciling different tax reform bills proposed by Congress and the Senate, with last week’s news about the Senate proposing a delayed implementation for corporate tax cuts still reverberating in media. Outgoing Federal Reserve Chair Janet Yellen will also join the panel discussion with Draghi, Carney and Kuroda at the ECB conference at 10.00 BST. US Producer PRices are due at 13:30 BST.

CAD The loonie lost some ground against USD yesterday on a day without data due to the Remembrance holiday. Meanwhile oil retraced some of its gains as the International Energy Agency classified the US shale surge as the biggest boom ever in the history of oil and gas and expect the growth in US oil production to equal or surpass historical peaks in Saudi Arabia and the Soviet Union.

UK news

  • Reuters: Weaker than ever, May faces test in parliament over Brexit plans. Prime Minister Theresa May’s blueprint for Britain’s exit from the European Union faces a crucial test starting on Tuesday, when members of parliament try to win concessions from a weakened leader on the government’s legislation to sever ties. It is yet another battle for May after scandals and gaffes that have brought questions about her leadership into the open. As many as 40 of her MPs would support a no-confidence motion against her, according to the Sunday Times newspaper. But many sources in her governing Conservative Party say now is not the time to force her out because despite backing Britain remaining in the EU, even if reluctantly, they think she is still the best option to deliver Brexit.
  • FT: Euro climbs after German GDP data beat estimates. The common currency got a boost on Tuesday after Germany reported stronger than expected economic data that provided the latest evidence of the acceleration of the eurozone’s biggest economy. Germany’s economic output climbed at a sequential clip of 0.8 per cent in the third quarter, exceeding economist expectations of 0.6 per cent. The report was the most recent sign of strength for the bloc’s powerhouse and bolsters the case for the European Central Bank to begin tightening monetary policy next year.

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