Morning Report: 20 April 2018

April 20, 2018

GBP. Sterling had an interesting session yesterday, at first taking poor retail sales data on the chin and rallying slightly, before taking a pummelling overnight as Mark Carney once again raised the prospect of the Bank of England holding rates in May. Carney’s statements to the BBC come after a fairly hawkish previous series of statements, including hawkish minutes, which had firmly entrenched expectations of a hike at May’s meeting. Yesterday’s Retail Sales figures were dismal as expected, showing a sharp drop in sales in March, partly due to inclement weather. Michael Saunders of the BoE’s Monetary Policy Committee will speak today at 10:30 BST.

USD. USD broke higher yesterday afternoon, as fixed income markets once again reflected higher expectations of rates and inflation in the long run. Weekly Unemployment Claims were once again very low, while the Philly Fed Manufacturing Index and the CB Leading Index also performed reasonably well. The US data calendar will be quiet today, but reports emerged overnight of possible measures by the Trump administration to curb Chinese investment into technology companies – potentially risking reigniting trade fears from earlier this month.

EUR. Yesterday saw a relatively good day for the euro, which only lost ground to a handful of G10 currencies such as USD and JPY, despite the release of a deteriorating current account surplus in the Eurozone for February. German PPI MoM came in just shy of expectations this morning at 0.1%, adding to a string of negative surprises, with Eurozone Consumer Confidence figures released at 15:00 BST.

CAD.  After a good start to the week, CAD seems to have taken its foot off the pedal and yesterday incurred its second day of losses against USD in a row. The cautious “wait and see approach” signalled by Bank of Canada Governor Stephen Poloz may still have weighed on the loonie as little data came out yesterday. Today should be more exciting with two top-tier data releases at 13:30 BST; the Consumer Price Index and Core Retail Sales.

UK news

  • Financial Times: Markets should not bet on a May rate rise, says Mark Carney Financial markets are wrong to assume a UK interest rate rise in May is a foregone conclusion as softer economic data are giving the Bank of England pause for thought, said Mark Carney.
  • Reuters: EU’s Barnier says still some 25 percent of work to do on Brexit The European Union’s chief Brexit negotiator Michel Barnier said on Friday some 25 percent of work remained to be done on a pact covering UK withdrawal from the EU, including crucial issues such as management of the Ireland/Northern Ireland border.
  • Bloomberg: EU to Reject U.K. Brexit Plan for the Irish Border European Union officials are set to reject a potential U.K. solution to the crucial issue of what happens to the Irish border after Brexit, deepening the stalemate in negotiations.

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