Morning Report: 22 November 2017

November 22, 2017

GBP Sterling traded sideways yesterday, ahead of today’s Autumn budget statement from Chancellor Phillip Hammond. Yesterday’s Industrial Order Expectations index from the Confederation of British Industry showed order books at their strongest for almost 30 years, as sterling’s weakness over the past year has its expected effect on the competitiveness of UK goods. Members of the Bank of England’s rate setting Monetary Policy Committee testified to lawmakers, although little new information about the outlook for monetary policy was given. Thus, eyes will be on Chancellor Phillip Hammond, who will today deliver a career defining budget, with both Theresa May’s Government and his own position under attack from multiple directions. UK macro data is reasonably strong at the moment, and sterling has responded somewhat favourably to ongoing efforts to progress Brexit negotiation. A budget that delivers productivity boosting measures while avoiding growth-harming spending cuts could plausibly be good for sterling, while another series of failed proposals like those in the March Budget could risk the Chancellor’s role.

EUR EURUSD closed not far from open yesterday, as markets waited in vain for some form of news about the future of Germany’s government. Various news outlets are reporting this morning that Angela Merkel is making a renewed attempt at a “grand coalition” with her previous partners, the Social Democrats, a prospect that the party previously rejected, but would stave off another election. Today at 15:00 GMT eurozone Consumer Confidence figures will be released.

USD USD highlights of the past 24 hours have included fresh all-time highs against the Turkish Lira, and some weakness, notably against the Japanese yen, after outgoing Fed Chair Janet Yellen spoke once again against tightening rates too quickly. The data calendar is more eventful today, and includes Durable Goods Orders at 13:30 GMT, accompanied by weekly Unemployment Claims. Expectations are high for the Core Durable Goods Series, which excludes volatile items like transportation, and rose 0.7% last month. Minutes from the Federal Open Market Committee’s latest meeting will be released at 19:00 GMT, and as always have the potential to provide some insight into the balance of opinion on the committee.

CAD The loonie was one of the few major USD pairs that showed some life yesterday, rallying in the afternoon despite a lack of progress in the latest round of NAFTA talks. The Mexican peso also rallied yesterday, suggesting that perhaps market participants have taken a “no news is good news” approach to NAFTA talks, and that the lack of incendiary tweets from the US President has been taken as a sign of some progress, despite Canadian Foreign Affairs Minister Chrystia Freeland saying “significant differences” remained in the parties positions. Yesterday’s data included a big miss on monthly Wholesale Sales, which contracted 1.2% in September.

UK news

  • Telegraph: Judges under ‘intolerable pressure’ from social media, says new Lord Chief Justice. In his first interview since becoming the most senior judge in England and Wales last month, Sir Ian Burnett warned that abuse of judges “undermines the rule of law” and damages confidence in the judiciary.
  • Reuters: Britain to detail Brexit bill when EU agrees to move talks forward. Prime Minister Theresa May will only detail how big a divorce settlement Britain is willing to pay the EU when the bloc gives a commitment to moving talks forward, according to a plan rubber-stamped by even her most pro-Brexit ministers.
  • Daily Mail: The EU is insulting Britain by demanding a huge payment before discussing trade, says a top German politician. The EU is ‘insulting’ Britain by demanding a huge upfront payment before talking about trade, a senior German politician said tonight. Hans-Olaf Henkel said EU negotiator Michel Barnier was trying to get Britain to ‘name a price without knowing what you are going to get for it’.

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