Morning Report: 19 December 2017

December 19, 2017

GBP The major currency pairs were quiet yesterday, which allowed sterling to regain some ground against the US dollar. Politics remained the main focus of news flow, as posturing from both sides of the Brexit negotiations kicked into overdrive. Theresa May’s Cabinet met to discuss the nature of the deal Britain will be seeking, with Brexit Secretary David Davis reported to be preparing to warn the European Union that it could not cherry pick sectoral deals as a part of trade talks. Equally, EU chief negotiator Michel Barnier made similar remarks in reference to the City of London and financial services, clarifying that the “passporting” rights currently enjoyed by UK financial institutions would be lost. For now, the objective of UK negotiating strategy seems to be to attempt to achieve a “cake and eat it” outcome, whereby Britain engages in regulatory divergence, while retaining high levels of access to European markets.

EUR The euro traded higher against USD yesterday, as the greenback softened generally. European inflation data was bang on expectation in its final reading for November, with the headline Consumer Price Index rising 1.5% and the Core Index, which excludes fuel, rising 0.9%. The core index in particular is rising at more or less the same rate as the last three years. The data calendar today is rather sparse, with the main release being the German IFO Business Climate survey at 09:00 GMT.

USD USD weakened yesterday, as Friday’s momentum and excitement over tax reform progress proved to be short lived. The House of Representatives is expected to vote on tax reform today, sending the bill to the Senate and then ultimately President Trump for passage into law as earlier as this year, barring any hiccups. Today at 13:30 GMT housing market data will be released include Building Permits and Housing Starts, alongside the Current Account. The Federal Reserve’s Neel Kashkari will at an event in Minnesota, although the timing is unconfirmed.

CAD The loonie had a choppy session yesterday, but ultimately closed only marginally higher against USD than open. Headlines and data were rather scarce, although purchases of Canadian securities by foreigners rose further into positives in October, driven by record buying of Canadian bonds. No data will be released today.

UK news

  • Reuters: Eurosceptics baulk as May pitches status quo Brexit transition. LONDON (Reuters) – British Prime Minister Theresa May told parliament her plan on Monday for a Brexit transition period with broadly the same access to European Union markets but was met with scepticism from pro-Brexit lawmakers fearful of a watered-down EU exit.
  • Guardian: UK cannot have a special deal for the City, says EU’s Brexit negotiator. Britain cannot have a special deal for the City of London, the European Union’s chief Brexit negotiator has told the Guardian, dealing a blow to Theresa May’s hopes of securing a bespoke trade agreement with the bloc.

Morning Report: 19 December 2017

GBP The major currency pairs were quiet yesterday, which allowed sterling to regain some ground against the US dollar. Politics remained the main focus of news flow, as posturing from both sides of the Brexit negotiations kicked into overdrive. Theresa May’s Cabinet met to discuss the nature of the deal Britain will be seeking, with Brexit Secretary David Davis reported to be preparing to warn the European Union that it could not cherry pick sectoral deals as a part of trade talks. Equally, EU chief negotiator Michel Barnier made similar remarks in reference to the City of London and financial services, clarifying that the “passporting” rights currently enjoyed by UK financial institutions would be lost. For now, the objective of UK negotiating strategy seems to be to attempt to achieve a “cake and eat it” outcome, whereby Britain engages in regulatory divergence, while retaining high levels of access to European markets.

EUR The euro traded higher against USD yesterday, as the greenback softened generally. European inflation data was bang on expectation in its final reading for November, with the headline Consumer Price Index rising 1.5% and the Core Index, which excludes fuel, rising 0.9%. The core index in particular is rising at more or less the same rate as the last three years. The data calendar today is rather sparse, with the main release being the German IFO Business Climate survey at 09:00 GMT.

USD USD weakened yesterday, as Friday’s momentum and excitement over tax reform progress proved to be short lived. The House of Representatives is expected to vote on tax reform today, sending the bill to the Senate and then ultimately President Trump for passage into law as earlier as this year, barring any hiccups. Today at 13:30 GMT housing market data will be released include Building Permits and Housing Starts, alongside the Current Account. The Federal Reserve’s Neel Kashkari will at an event in Minnesota, although the timing is unconfirmed.

CAD The loonie had a choppy session yesterday, but ultimately closed only marginally higher against USD than open. Headlines and data were rather scarce, although purchases of Canadian securities by foreigners rose further into positives in October, driven by record buying of Canadian bonds. No data will be released today.

UK news

  • Reuters: Eurosceptics baulk as May pitches status quo Brexit transition. LONDON (Reuters) – British Prime Minister Theresa May told parliament her plan on Monday for a Brexit transition period with broadly the same access to European Union markets but was met with scepticism from pro-Brexit lawmakers fearful of a watered-down EU exit.
  • Guardian: UK cannot have a special deal for the City, says EU’s Brexit negotiator. Britain cannot have a special deal for the City of London, the European Union’s chief Brexit negotiator has told the Guardian, dealing a blow to Theresa May’s hopes of securing a bespoke trade agreement with the bloc.

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