Morning Report: 21 March 2018

March 21, 2018

GBP Sterling faced some light sell pressure against the US dollar yesterday, but strengthened against the euro, largely shrugging off an across the board miss for February inflation data. The headline Consumer Price Index was up 2.7% year on year, compared to 3.0% in January, while Core CPI was up 2.4% compared to 2.7% previously. Both figures were only marginally below expectations, but the miss highlighted the continued uncertainty around Britain’s inflation outlook. Chris Salmon stepped down from his role as Executive Director for Markets at the Bank of England and Chair of the Global Foreign Exchange Committee, causing a minor blip in sterling. Today at 09:30 GMT, monthly Labour Market data will be released.

USD The greenback was well bid yesterday as market participants prepared for what is expected to be a hawkish Federal Open Market Committee meeting tonight. Expectations for Jerome Powell to deliver a rate hike tonight are high, with futures markets pointing towards near certainty of a raise, and even a small chance of it being by 50 basis points. In the shadow of the FOMC meeting a new episode of the debt ceiling drama in the US is slowly building, as another budget deadline looms on Friday and a third Government shutdown for this year is still on the cards. The FOMC rate announcement takes place tonight at 18:00 GMT, followed by a press conference at 18:30.

EUR Euro had a dismal day yesterday and lost against most major currencies, among which CAD, USD and GBP were its biggest tormentors. The German ZEW sentiment survey came in more or less as expected whereas the expectations index fell massively to 5.1. This may be an indication that German exporters are starting to get worried by an imminent trade war, while the survey as a whole points towards a slower growing Eurozone economy in the first quarter. The data calendar for the Eurozone is empty today.

CAD After a month of general CAD weakness the loonie had a day of respite yesterday and found itself to be the top performer on the G10 currency board. The main driver for this was a report by The Globe and Mail that the Trump administration has dropped the demand for Canada and Mexico to use at least 50% of US content for cars destined for the US market. There are no economic data releases from Canada today.

UK news

  • Financial Times: Facebook faces probe by US regulators US regulators are set to question Facebook about how its user data were leaked to Cambridge Analytica, as the UK political consultancy suspended its chief executive. The Federal Trade Commission is asking the technology group for more information about how Cambridge Analytica, which worked for the Trump election campaign, obtained data of more than 50m Facebook users, according to people familiar with the matter.
  • Financial Times: One in 7 EU companies moves supply chain out of UK One in seven European companies with UK suppliers had moved part or all of their business out of Britain, according to the Chartered Institute of Procurement and Supply, which added that prices have risen since the Brexit vote and are likely to continue to rise.
  • Reuters: EU primes UK trade offer, seeks Brexit transition endorsement EU governments agreed on Tuesday to offer British banks and airlines hope of good market access after Brexit but kept London waiting for confirmation it will get the transition deal it wants to avoid disrupting business.

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