Morning Report: 21 December 2017

December 21, 2017

GBP Sterling weakened yesterday and overnight, as scandal claimed a senior ally of Prime Minister Theresa May and weak Consumer Confidence figures were released overnight. In testimony to Parliament’s Treasury Select Committee, Bank of England Governor Mark Carney made overtures to the European financial sector, saying that it would be allowed to continue to operate on a similar basis to current “EU Passport” rights after Brexit, despite the prospect of the EU tightening regulation of UK banks operating on the continent. Overnight the GfK Consumer Confidence Index dropped slightly to -13, compared to -7 in January of this year. Government borrowing figures will be released this morning at 09:30 GMT.

EUR The euro saw a burst of strength yesterday afternoon, breaking higher against the US dollar, and has managed to hold on to a decent chunk of its gains overnight. Bundesbank Head and European Central Bank policy maker Jens Weidmann was true to form in a speech yesterday and called for an end date for the ECB’s bond buying programme, saying that wage growth would add to upwards price pressure in the future. Today at 15:00 GMT eurozone Consumer Confidence figures will be released.

USD USD performance was a mixed bag yesterday, with the greenback weakening against the euro but managing to hold its own elsewhere. Tax reform legislation cleared the final legislative hurdles with a final vote in the House of Representatives, meaning that the bill will become law once signed by President Trump, who said in a statement that he “promised the American people a big, beautiful tax cut for Christmas…With final passage of this legislation, that is exactly what they are getting.”

CAD The loonie strengthened gradually during the day against the dollar, but moves remain moderate as markets await the last significant Canadian data of the year today and tomorrow. Retail Sales and Consumer Price Index data will be released at 13:30 GMT, along with the ADP estimate of monthly job creation. Core CPI is likely to be more interesting than the headline index, which is expected to increase sharply due to fuel costs. Wage growth has been strong recently, and the jobs market is getting tighter while household spending relative to GDP is pushing new all-time highs – meaning there are plenty of grounds for a hawkish shift at the BoC in early 2018 if inflation begins to pick up sharply.

UK news

  • Reuters: May forces her deputy to resign over pornography scandal. LONDON (Reuters) – Prime Minister Theresa May forced her most senior minister, Damian Green, to resign after an internal investigation found he had made misleading comments about pornography on computers in his parliamentary office.
  • Guardian: Bank of England to allow EU banks to keep UK operations unchanged after Brexit. The Bank of England plans to allow European banks to maintain their UK operations under current rules following Brexit, in a direct challenge to European Union regulators to adopt the same policy towards UK-based banks.
  • Telegraph: Four in five GPs ordering needless drugs and tests for fear of being sued, amid soaring small claims by patients. Four in five GPs say they are ordering needless tests and drugs for patients for fear of otherwise being sued. It comes amid soaring numbers of successful small claims against the NHS, which have risen by more than a quarter in one year.

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