Morning Report: 19 March 2018

March 19, 2018

GBP The British pound was generally well bid on Friday, finishing the day higher against all the Major currencies except JPY. This week is bursting with important events for sterling, with Consumer Price Index on Tuesday, Average Earnings and other labour market data on Wednesday, as well as Retail Sales and a Bank of England Rate Announcement on Thursday. Additionally, the European Council meets on Thursday and Friday to discuss a deal on a post-Brexit transition deal under the assumption that all divorce matters will be resolved first.

USD The DXY dollar index was up on Friday, which meant the dollar strengthened for four consecutive weeks, while it is also on the advance this morning. On Sunday, Treasury Secretary for International Affairs David Malpass announced America’s withdrawal from a decades old trade negotiation with China, as the White House is reportedly “disappointed” with the increasing role of the Chinese government in the economy. However, Malpass quickly retracted his statement, claiming that he simply “misspoke”, though tensions between the two trading partners are clearly continuing to grow. Meanwhile, President Donald Trump is renewing his attacks on the integrity of Special Counsel’s Robert Mueller, through his favoured medium of a tweet barrage. This week, markets hold their breath for the Federal Open Market Committee Rate Announcement and Press Conference on Wednesday, where new Chair Jerome Powell is expected to mark his inaugural meeting by overseeing an interest rate hike. Markets eyes will be on the release of the Fed’s “dot plot”, which indicates how many more interest rate hikes are likely this year.

EUR Euro lost ground against sterling, the greenback and the yen on Friday, but made inroads against a handful of other G10 currencies and this morning shows an eerily similar picture. The Headline Final Consumer Price Index for February missed the mark by a whisker on Friday and showed a price growth of 1.1%. This week an extensive collection of Eurozone sentiment data is released, with German ZEW Economic Sentiment on Tuesday and German Ifo Business Climate and Flash Purchasing Manager Indices on Thursday.

CAD The loonie suffered some losses against USD on Friday and continues to trade down this morning. Friday’s data was on the disappointing side, with Foreign Securities Purchases being way lower than expected, which indicates fewer capital inflows into the loonie, while also February Manufacturing Sales lagged behind forecasts and showed a contraction of 0.8%. This week we have to wait until Friday for the most import Canadian data, but then we will be rewarded with a double whammy of top-tier data; Consumer Price Index and Retail Sales.

UK news

  • Financial Times: Moscow thanks UK for helping Putin win landslide vote in Russia Skripal accusations mobilised high turnout that gave president 76% of vote, says Kremlin
  • Reuters: Oil prices fall as increased U.S. drilling points to higher output Oil prices fell on Monday as increased drilling in the United States pointed to more output, raising concerns about a return of oversupply.
  • The Guardian: Mortgage lenders taking increasing risks, warns Bank of England The Bank of England has warned high street banks are taking increasing risks selling mortgages and commercial loans that could threaten the stability of the financial system if left unchecked. Threadneedle Street put banks on notice that it could force them to strengthen their financial reserves after finding almost a fifth of new mortgage lending has gone to customers who only just meet its affordability rules.

Site edition