Morning Report: 16 February 2018

February 16, 2018

GBP The pound strengthened further against the ailing US dollar yesterday, while trading flat against the euro. Amid momentous international events such as the resignation and replacement of South Africa’s President Zuma and the reappointment of Japanese Central Bank head Kuroda, sterling news flow was rather quiet yesterday. Reports circulated that EU officials are considering easing the terms of a potential Brexit transition deal, which would remove or amend a previous “Punishment Clause”. This morning the Institute of Fiscal Studies is reporting the results of a study in to home ownership, which has found that home ownership rates among young adults has “collapsed” over the last two decades, a development that is likely to have profound continuing political, economic and social consequences. The sterling calendar is once again exciting this morning, and Retail Sales figures will be released at 09:30 GMT. After a sharp contraction in December, a modicum of improvement is expected in January’s figures.

EUR EURUSD traded higher yesterday and extended its gains this morning, as the US dollar continues to be heavily sold. Eurozone Trade Balance data was released yesterday, and showed a surplus on trade in goods of €25.4b in December, slightly lower than a year ago, due to imports expanding faster than exports. Elsewhere employment numbers from France showed unemployment reaching a fresh post crisis low, consistent with the trend across the region. This morning’s sole release of note was the German Wholesale Price Index, which rose 0.9% in January.

USD The dollar took yet another battering yesterday, with the punishment continuing overnight and this morning. Producer Prices rose 0.4% in January, even when volatile items such as fuel were excluded. The release further highlights inflationary risk in the US, but was ignored by markets, suggesting that fundamental data is somewhat beside the point for the dollar at present. Building Permits and Housing Starts will be released this afternoon at 13:30 GMT, alongside import prices.

CAD Despite seeing a dash of volatility in the morning, USDCAD closed lower yesterday as US dollar weakness took hold of markets. The Bank of Canada’s Lawrence Schembri spoke yesterday, noting that elevated debt levels meant there was less room to borrow for spending. Today at 13:30 GMT Foreign Securities Purchases and Manufacturing Sales data will be released.

UK news

  • Guardian: Business leader warns May against harsh immigration policy. British companies are facing a recruitment crisis, with labour shortages hitting critical levels in some sectors, according to a business leader who has urged the government to produce details on a post-Brexit immigration system.
  • Reuters: UK to push EU for City of London’s favoured Brexit plan: FT. Britain’s government is ready to push for the kind of Brexit regulation plan that the City of London has long favoured but which has already run into opposition in Brussels, the Financial Times reported on Friday.

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