Morning Report: 20 March 2018

March 20, 2018

GBP Sterling enjoyed a strong boost yesterday morning as it became clear a breakthrough had been made in Brexit talks. Michel Barnier and David Davis confirmed in a press conference that a deal on a post-Brexit transition period had indeed been struck, removing a substantial source of uncertainty for the UK economy. The concessions made by Theresa May for the sake of the deal include several previous sticking points. These include the fact that Britain will remain subject to EU rules without input during the transition period, and a legal fallback provision for the Irish border, whereby the area will maintain regulatory alignment if an alternative arrangement cannot be struck. The concessions may carry a political cost for May. Eurosceptic MP Jacob Rees-Mogg said the UK had “rolled over without even having its tummy tickled”, while May’s coalition partners in the DUP also began to voice dissatisfaction. Today at 09:30 GMT monthly Consumer Price Index data will be released.

USD The dollar once again became something of a whipping boy for markets yesterday afternoon, as the dollar index DXY reversed its gains from Friday. Little headline data was released, although the usual chatter about trade tensions continued, with the US reportedly issuing criteria to the EU for exemption from steel tariffs. Today’s calendar is barren for the dollar, as anticipation builds for tomorrow’s Federal Reserve events.

EUR Markets went through the usual pantomime yesterday after an anonymously sourced “ECB SOURCES:” story from Reuters sent the euro higher. The story reported that the Governing Council of the European Central Bank was moving its discussions from the end of Quantitative Easing, to the steepness of the rate hike path afterwards, and acted as another sign of impending ECB policy normalisation. This morning at 10:00 GMT the widely followed ZEW Economic Sentiment survey will be released for the eurozone and Germany.

CAD The loonie began yesterday well in the doldrums, reaching a fresh low against the US dollar, before staging a rally in the mid morning and afternoon to leave it trading at levels comparably to Friday morning. Finance Minister Bill Morneau spoke in Buenos Aires and made some positive comments about NAFTA talks, stating that progress was being made and all three sides wanted to do a deal quickly. Today at 12:30 GMT Wholesale Sales data will be released.

UK news

  • Reuters: UK investigating Facebook’s response to alleged data breach. Britain is investigating whether Facebook did enough to secure data after reports that a political consultancy hired by Donald Trump improperly accessed information about 50 million Facebook users, Information Commissioner Elizabeth Denham said on Monday.
  • Telegraph: Jacob Rees-Mogg to fling fish from trawler on Thames in protest for fishermen ‘betrayed’ by May’s Brexit deal. Theresa May is facing a Brexit backlash from Tory MPs over her “abject betrayal” of Britain’s fishermen with rebels planning a fishing boat protest on the Thames.