Morning Report: 17 April 2018

April 17, 2018

EUR. The euro was out of the spotlight yesterday and weakened against sterling, but took advantage of the continued rout in the US dollar. Aside from a 0.0% month on month print for the German Wholesale Price Index, no major data was released. Today at 10:00 GMT, the widely followed ZEW Economic Sentiment Survey will be released, with the respected German sub-index expected to fall into negative territory after several months of sharp declines.

USD. A fresh round of currency rhetoric proved too much for the US dollar yesterday, as Donald Trump commented on twitter about Russia and China devaluing their currencies while the US raises interest rates. China’s currency is stronger by almost 10% year on year against USD, and the rouble’s weakness is largely due to US sanctions, but these finer points seemed lost on the Tweeter in Chief. The prospect of the President commenting negatively on interest rate hikes seems particularly risky for the dollar due to past weak dollar rhetoric from the administration, despite the legal independence of the Federal Reserve. Solid March Retail Sales were largely ignored by markets. Today at 13:30 GMT Building Permits and Housing Starts will be released, followed at 14:15 GMT by Industrial Production and a speech from the Fed’s John Williams.

CAD. The Canadian dollar followed the broad G10 trend of making gains against USD yesterday. With oil prices remaining high over continuing uncertainty in the Middle East, and Saudi Arabia discussing the possible target of an $80 barrel of oil, the loonie has performed relatively well. Manufacturing sales MoM will be released today at 1:30 BST, but the loonie seems to be finding its strength off the back of a weakening dollar and rising oil prices as opposed to recent data releases. However, a string of strong data may force the Bank of Canada out of its “wait and see” period and into a monetary policy decision.

GBP. Sterling advanced further yesterday, and reached a fresh post-referendum high against the US dollar this morning, ahead of today’s labour market data. However, the labour market data showed lower than expected growth in Average Weekly Earnings at 2.8%, causing GBPUSD to drop below highs seen earlier today. The Conference Board’s Leading Index fell to -0.4%, indicating a substantial deterioration in the outlook for the economy based on the leading indicators that comprise the index. This morning at 09:30 GMT, labour market data was released reporting a slight miss in Average Weekly Earnings, 2.8%, from its forecast of 3.0% despite Unemployment falling to its lowest level since 1975 at 4.2%.

UK news

  • Wall Street Journal: Trump to Nominate Richard Clarida, Michelle Bowman to Fed Board .President Donald Trump revealed his latest picks to fill empty seats on the Federal Reserve Board, saying Monday he would nominate Columbia University economist Richard Clarida as vice chairman and Kansas banking regulator Michelle Bowman as a governor.
  • Financial Times: China first-quarter GDP grows 6.8% on private investment rebound. China’s economy grew 6.8 percent in the first quarter over the same period last year — above the government’s 6.5 percent target — as a rebound in private investment compensated for a declining trade surplus.
  • Reuters: Euro reform – push-back from Berlin. The next few days could be decisive in determining whether longstanding efforts to make the euro zone more resilient to future shocks come to fruition.