Morning Report: 24 January 2018

January 24, 2018

GBP Sterling is heading for its sixth consecutive week of gains against the greenback as yesterday once again saw improved post-referendum highs, while it also showed most of the other G10 currencies its heels. The move on cable was caused mostly by weakness in the US dollar, although risen hopes for a favourable trade deal with the European Union has created a more bullish environment for the sterling lately as well. Today December’s labour market data is published at 9:30 GMT containing Unemployment figures and the vital Average Earnings Index. The latter tells us something about whether British workers will see a real wage gain in the high inflation area known as the United Kingdom.

EUR The single currency put a fresh 3 year high on the boards against USD this morning, although it sold off slightly against most notably JPY and CHF yesterday. The European Commission’s measure of Consumer Confidence in the Eurozone showed a headline reading of 1.3, which is but a whisker away of its all-time record of late 2000. Throughout the morning the German and French Services and Manufacturing Purchasing Managers Indices are released. At 9:00 GMT these readings together with data from the other Eurozone countries form the PMI readings for the entire currency area. Many of the sub-indices reside near multi-year highs, a feature which is expected to be repeated in this edition.

USD The dollar once again had an off day against the entire G10 currency board and the DXY dollar is now at its lowest point since 2015 after two consecutive weeks of losses. Markets seem unimpressed by the solution to the government shutdown as it seems to be only a short term stay of execution. The Republicans and Democrats still seem miles away from reaching a compromise on immigration legislation, something which is likely to be needed before Democrats are willing to support any further increases of the debt ceiling. Today at 15:30 GMT the US Crude Oil Inventories are announced.

CAD The loonie made minor gains against the greenback, while trading more or less flat against other currencies like GBP and EUR. NAFTA keeps on dominating deadlines as some tangible results are expected from this second last round of negotiation. Trump does a masterful job at keeping uncertainty about the outcome of the trade talks alive by saying they are “moving along pretty well”, while simultaneously telling the US might still terminate the pact. No data today of any major significance is expected today for Canada.

UK news

  • Reuters: Global growth to roll to highs not seen in eight years The global economy is expected to grow at a robust pace this year and reach an altitude not seen since 2010, as momentum builds in developed economies and inflation revives, Reuters polls of over 500 economists show.
  • Reuters: Euro moves a side effect, not the objective of ECB policy: Draghi FRANKFURT (Reuters) – The European Central Bank’s bond buys have not led to “statistically significant” moves in the euro and exchange rate shifts are a mere side effect, not the objective of policy, ECB President Mario Draghi said in a letter on Wednesday.
  • Financial Times: Mnuchin says weaker dollar ‘good’ for US trade, opportunities Steven Mnuchin arrived at the World Economic Forum in Davos with an uncompromising message to the world that the Trump administration’s America First policies were good for the US and the rest of the world.

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