Morning Report: 19 January 2018

January 19, 2018

GBP Sterling once more drifted higher against USD yesterday, reaching high’s close to Wednesday’s late night spike, while remaining flat against the euro. No major sterling data was released yesterday aside from the Royal Institute of Chartered Surveyors’ House Price Balance, which showed a balance of 8% of surveyors were reporting price increases in their areas. Later in the evening Theresa May and French President Emmanuel Macron had a generally cordial press conference to mark reach an agreement on several post-Brexit border issues relating to Calais. Macron did repeat the standard EU policy of rejecting any possibility of full access to the single market for the UK post-Brexit, including for financial services, unless the UK was willing to take on the responsibilities of the single market, such as regulatory compliance, movement of people, and budgetary contributions. Today at 09:30 GMT monthly Retail Sales figures will be released.

EUR The euro also went on the offensive against USD yesterday, amid slow news flow. Bundesbank head and European Central Bank Chief Hawk made some typical statements in a speech, saying that he believed wage growth in the German economy was beginning to pick up. This morning’s main release is the eurozone’s Current Account balance at 09:00 GMT. Angela Merkel’s prospective coalition partners in the SPD will look for ways to build support for formal coalition talks, with a vote on Sunday, with Germany’s political stability the line.

USD Higher fixed income yields are normally a USD-positive development, but over the last 24 hours they have been overshadowed by the latest political developments on Capitol Hill. Lawmakers from the Republican Party have, despite controlling the White House and both houses of the legislature, been scrambling to avoid a government shutdown this week as the US approaches it’s debt ceiling. The debt ceiling is a self imposed limit beyond which the government cannot borrow, a rare feature among developed economies. A stopgap measure to raise the limit passed the house, but must now face the senate. In the meantime, the yield of the 10 year US treasury bond rose to its highest level since 2016 – a sign of markets beginning to expect higher inflation, and interest rates.

CAD The loonie traded broadly flat yesterday, in an uneventful session following Wednesday’s rate hike. Today at 13:30 GMT Foreign Securities Purchases data will be released, accompanied by Manufacturing Sales.

UK news

  • Reuters: Let’s build a bridge to Europe after we Brexit, Johnson suggests. Britain’s most prominent campaigner for leaving the European Union, Boris Johnson, has suggested building a giant bridge across the English Channel to France after Brexit, The Daily Telegraph reported.
  • Guardian: UK to pay extra £44.5m for Calais security in Anglo-French deal. Britain will pay £44.5m for extra security measures in France to prevent another refugee camp forming in Calais or any other Channel port, Theresa May is to announce.

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