Morning Report: 21 November 2017

November 21, 2017

GBP The week got off to a slow start yesterday, with subdued volatility on many major fx pairs. Sterling maintained its momentum against USD and EUR, shrugging off any domestic political headlines. The Bank of England’s Dave Ramsden spoke in London, saying that Brexit was reinforcing the low growth in productivity seen in recent years. Today at 10:00 GMT we will hear a whole lot more from the BoE, as senior Monetary Policy Committee members including Governor Mark Carney testify to Parliament’s Treasury Committee. Given the pessimistic assessment of potential growth in the last Inflation Report, the MPC will have plenty to talk about, and potentially conflict with the committee’s predominantly Conservative membership, as has been the case in the past.

EUR Political risk continued to weigh on the euro yesterday, as Angela Merkel suggested that she was not interested in a minority government, suggesting that either coalition talks will be restarted, or Germany will head to the polls in a snap election. The situation remains very fluid and either outcome remains entirely plausible, with the euro almost certainly likely to take a leg lower in the event of a snap election. No headline euro data will be released today, meaning the focus on German politics will be all the more intense.

USD Euro weakness this week seems to have given the US dollar an opportunity to rally, and the greenback was generally well bid on a number of pairs including against CAD, EUR, JPY, and AUD yesterday and overnight. Yesterday’s data included a strong beat on the CB Leading Index, an amalgamation of various forward looking economic indicators. Janet Yellen, who recently said she would be stepping down from the Federal Reserve’s Board altogether upon the end of her tenure as Chair, will speak today at 23:00 GMT.

CAD The loonie sold off to USD yesterday, briefly trading near the weakest rate in several weeks overnight. Commodities were lower on the whole, and higher yields in US fixed income weighed on the loonie, while crude oil prices took a leg lower. Today at 13:30 GMT monthly Wholesale Sales data will be released.

UK news

  • Guardian: Theresa May’s cabinet agrees to pay more to break Brexit deadlock. Theresa May’s cabinet is prepared to increase its financial offer to the EU in an attempt to break the deadlock in Brexit talks but will make clear that any figure is contingent on the final deal, including the shape of a future trading arrangement.
  • Reuters: Brexit campaign probed over possible breach of electoral finance rules. LONDON (Reuters) – Britain’s Electoral Commission has opened an investigation to establish whether Vote Leave Limited, the organisation behind the official campaign to leave the European Union, breached campaign finance rules during the 2016 referendum campaign.

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