Morning Report: 16 March 2018

March 16, 2018

GBP Sterling managed to trade slightly higher against USD yesterday, despite a volatile session with several large intraday swings. News flow was light, apart from continued examination and recrimination around the diplomatic spat between the UK, its allies, and Russia. The EU published a revised draft treaty for Brexit, covering divorce terms and transition, but no major changes, and no solution to the issue of the Northern Irish border. The Conference Board’s Leading Index of forward looking economic data will be released at 13:30 GMT.

EUR On balance the euro had a disappointing day with losses against USD, GBP and NOK, although inroads were made against AUD, CAD and NZD which may have helped to ease the pain. This morning Reuters released an interview with European Central Bank Governing Council member Peter Praet which was slightly hawkish. He remarked that it can be seen as a sign that he is now publicly talking about winding down the asset purchasing program, hinting of a gradual shift in ECB policy. Today at 10:00 GMT the Eurozone Final Consumer Price Index figures are released.

USD USD saw broad strength against both emerging and developed market currencies yesterday, although JPY strengthened overnight. Yesterday’s data included solid prints for Manufacturing Indices from the Philadelphia and New York Federal Reserves, low weekly Initial Jobless Claims, and a beat for Import Prices. Rumours swirled that National Security Advisor H. R. McMaster would be the next to be fired from the White House, although the rumours were quickly denied, just as reports of Tillerson’s impending dismissal were in December. Housing Starts and Building Permits will be released this afternoon at 12:30 GMT, followed by Industrial Production and Capacity Utilization at 13:15. The Job Openings and Labour Turnover Summary will be out at 14:00.

CAD A dismal day materialised yesterday for CAD as it weakened across the board and saw multi-month lows against USD and GBP, while also trading close to multi-year lows against EUR. One driver for this was yet another statement from President Donald Trump, this time on Twitter, criticising the supposed US trade deficit with Canada. Markets quickly sold out of the Canadian dollar on the back of the tweet, given the negative potential implication that it has for US trade policy towards Canada, though analysts widely criticised the claim, given that official US trade data shows a net surplus of $2.8bn with Canada last year. To make matters worse, Canadian February real estate data was poor, showing Existing Home Sales were down 8.2% in Toronto and 15.2% in Vancouver compared to the January figures. Today at 12:30 GMT we have Security Purchases by Foreigners and Manufacturing sales.

UK news

  • Reuters: Unexpected euro zone slack could slow inflation rebound: ECB’s Praet Europe may be regaining some of its long-lost growth potential, European Central Bank chief economist Peter Praet said, a boon for the bloc’s five-year expansion but a potential drag on already weak inflation.
  • AFP: Western allies confront Moscow over spy attack, vote meddling Britain and its allies on Thursday blamed Moscow directly for a poison attack on a double agent in England, escalating diplomatic tensions as Washington separately announced sanctions against Russia for allegedly meddling in its elections. The leaders of Britain, France, Germany and the United States said there was “no plausible alternative explanation” for the use of the Soviet-designed nerve agent Novichok in the English city of Salisbury.
  • Financial Times: Irish border remains biggest obstacle to Brexit deal The Irish border issue is emerging as the biggest remaining obstacle to a Brexit transition deal next week, after UK concessions narrowed differences on a host of other exit issues. After weeks of minimal progress, Brexit negotiators in recent days made rapid headway on the detailed terms of a draft withdrawal treaty and 21-month transition, boosted by British concessions made at “supersonic speed”, according to one senior EU diplomat.

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