Morning Report: 15 November 2017

November 15, 2017

GBP Dollar weakness allowed GBPUSD to rally yesterday, despite a soft inflation print and ongoing political farce in the UK, but the pound was less fortunate against the euro, where it fell to fresh lows for the month yesterday and again this morning. Yesterday’s parliamentary shenanigans included prominent Conservative MPs defying the Government’s efforts to legislate a fixed date for Brexit, despite – in MP Dominic Grieve’s words – “blood-curdling threats”. YEsterday’s inflation data showed price pressure broadly unchanged in the UK, with the headline Consumer Price Index remaining at 3.0% year on year, the same as last month. This morning’s labour market data has put further mild pressure on the pound, after the Unemployment Rate remained unchanged at 4.3% in September and Average Weekly Earnings growth remained at 2.2%.

EUR The euro has had an incendiary 24 hours, after yesterday’s firm German GDP data combined with renewed global risk aversion overnight to create perfect conditions for strength in the single currency. Yesterday’s data included a firm print for the German ZEW Economic Sentiment Survey, which rose to 18.7 in its latest index reading, although eurozone Industrial Production fell by 0.6% as expected, after a big 1.4% increase previously. Today at 10:00 BST monthly Trade Balance data will be released for the eurozone.

USD The dollar took an absolute beating yesterday, as investors sold global risk assets and US treasuries saw falling yields across large parts of the sovereign curve. Fed Chair Janet Yellen appeared on a panel with her colleagues Kuroda (Japan), Carney (UK) and Draghi (ECB), and although the topic was central bank communications, a few interesting tidnits emerged when Yellen acknowledged the difficulty of policy makers expressing views on how they would vote ahead of a meeting. The Producer Price Index rose 0.4% in October, far above expectations, but this did little to support the Greenback. Today’s Consumer Price Index and Retail Sales releases at 13:30 GMT are therefore make or break for the greenback, and they will be followed by Business Inventories at 15:30 BST.

CAD No Canadian data was released yesterday, but the loonie saw plenty of intraday volatility as markets digested movements in the greenback and in crude oil prices. Sharp falls in spot crude oil prices caused a temporary spike in USDCAD, but the loonie recovered to close broadly unchanged. Today at 15:30 BST, official North American Crude Oil Inventory data from the US Energy Information Administration will be released.

UK news

  • FT: Pro-EU rebel Tories hit back after being branded ‘mutineers’. Skirmish reflects rising tensions over Brexit legislation. Pro-EU Conservative MPs have reacted defiantly to a front-page article in the Daily Telegraph depicting them as “mutineers” because of their opposition to elements of the government’s Brexit legislation. In a skirmish that reflects growing tension in the Tory party, Anna Soubry, a backbencher, accused the newspaper of engaging in a “blatant piece of bullying”, while Heidi Allen, a colleague, challenged Brexiter critics to “bring it on”. Pro-EU Tories have also threatened to rebel over government attempts to impose a fixed exit date — March 29 2019 at 11pm London time — which they say would tie Britain’s hand in talks.
  • Reuters: UK employment falls in third quarter, pay growth lags inflation again. Reuters Staff The number of people in work in Britain fell by the most in more than two years in the three months to September, a latest sign of weakness in Britain’s Brexit-bound economy, official data showed on Wednesday. At the same time, the inactivty rate – a measure of people not in work and not seeking a job – rose by the most in nearly eight years, the Office for National Statistics said. The data showed the unemployment rate held at a four-decade low of 4.3 percent as the number of people in employment fell by 14,000 and pay growth remained much slower than inflation. The ONS said workers’ total earnings, including bonuses, rose by an annual 2.2 percent in the three months to September, compared with 2.3

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