Morning Report: 17 January 2018

January 17, 2018

GBP Matching other major currencies against the dollar, sterling traded down yesterday, rallied briefly, and is now again on the back foot after another reversal overnight. Yesterday’s inflation data from the Office for National Statistics showed the headline Consumer Price Index falling back to 3% annual inflation, in line with expectations from forecasters and the Bank of England. Essential items such as Housing and Housing Services, and Transport were the largest gainers, while discretionary items like alcohol saw smaller increases, suggesting vendors may be wary of increases prices too quickly.

EUR The euro is also trading slightly down compared to yesterday morning, despite briefly reaching a fresh three year high overnight against the US dollar, after a number of European Central Bank sources may have given market participants cause for hesitance. Yesterday a Reuters report cited anonymous ECB sources saying that the Governing Council would not be revising its forward guidance at next week’s meeting, despite discussion of the topic at its last meeting. ECB Vice President Victor Constancio said in an interview that although the ECB does not target the exchange rate, they would be concerned about sudden movements in the euro that did not match fundamentals in the eurozone. This morning at 10:00 GMT, the most important item of fundamental eurozone data – the Consumer Price Index – will be released.

USD USD had an early morning wobble that saw it weaken sharply, but the move unwound over the course of the early morning and the greenback is now trading higher compared to yesterday morning against several currencies. Today we get some new insights as to the level of slack left in the economy with the Capacity Utilisation Rate at 14:15 GMT, which most recently reported its highest point in two and a half years. At the same time the monthly Industrial Production of December are published.

CAD The loonie traded flat against USD yesterday but has weakened slightly overnight, ahead of today’s crucial Bank of Canada releases, which include a monetary policy report and rate announcement at 15:00 GMT. A press conference will follow the releases at 16:15. Market expectations are for the BoC to hike rates, due to strong economic growth. Recent economic data has exceeded the BoC’s expectations, which were for growth to decelerate towards the end of 2017. The latest jobs report, which showed the fastest annual employment growth since 2002.

UK news

  • Reuters: Back Brexit law or risk chaos, May’s Conservatives tell MPs. LONDON (Reuters) – Prime Minister Theresa May’s Conservative Party urged MPs to back the government’s Brexit legislation at a vote in parliament later on Wednesday, warning opponents that trying to block the plan would bring chaos.
  • Bloomberg: European Car Sales Rise to 10-Year High. European car sales reached a 10-year high last year as widening economic growth boosted consumer confidence, with SUVs from French manufacturers Peugeot and Renault, Italian competitor Alfa Romeo and Japanese rival Toyota propelling demand.
  • Guardian: White House doctor says Trump will remain ‘fit for duty’ for years. Physician says president has benefited from ‘a lifetime of abstinence from tobacco and alcohol’ though he could stand to exercise more.

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