Morning Report: 24 November 2017

November 24, 2017

GBP Sterling’s seven day winning streak against the US dollar finally came to an end yesterday, as GBPUSD pared its recent advances back slightly. Yesterday’s data included an unrevised 04% reading for Gross Domestic Product growth in the 3rd quarter, and growth of 0.2% and 0.4% respectively in Business Investment and the Index of Services, both of which enjoyed large upwards revisions to growth in the second quarter. This morning’s headlines have included some comments from Theresa May, who spoke to media in Brussels, reinforcing how eager the UK is to move Brexit talks on from divorce payments to a transitional agreement and future trade arrangements. The Telegraph reported this morning that May will tell Donald Tusk that she is prepared to give more ground on the Brexit divorce bill in exchange for progress in talks, potentially a sterling positive development if May’s gambit is successful.

EUR Favourable headlines from Germany have helped the euro further consolidate its gains versus USD yesterday, as official sources from the previously coalition-averse SPD party confirmed that they were open to talks with Angela Merkel’s ruling CDU. Yesterday’s meeting minutes from the ECB showed a broad consensus in the ECB’s recent reduction and extension of bond buying, although several members were reportedly concerned that markets expected too much from the ECB beyond the current programme. This morning’s biggest release has been the IFO German Business Climate survey, which showed a record high in optimism among the surveyed German businesses.

USD The weighted USD index DXY traded flat yesterday and overnight, as the United States enjoyed Thanksgiving and no data was released. Today at 14:45 BST the US flash Manufacturing and flash Services PMIs will be published, while US news flow focuses on the ongoing net neutrality battle and embattled US Senator Roy Moore.

CAD The loonie climbed to a nine day high against USD yesterday morning, as oil prices continued to rise and FOMC minutes weakened the US dollar, before the afternoon brought disappointing Canadian Retail Sales and a sharp reversal for the loonie. The median forecast on Bloomberg was for 0.9% growth in Core Retail Sales, which exclude automobiles. In reality, sales grew only 0.3%, failing to undo last month’s 0.4% contraction. Disruptions in the Keystone pipeline added to speculation that the supply of crude oil in North-America could tighten. WTI crude prices are up almost 3.5% over the week reaching their highest point since 2015.

UK news

  • Sun: TAKEGOVER Leave campaign boss Michael Gove has won Theresa May’s backing in a cabinet tussle over clean break from EU. LEAVE campaign boss Michael Gove has won Theresa May’s backing in a furious Cabinet tussle over a clean Brexit from all EU rules, friends say. The PM’s top table is bitterly split over how close to stick to regulations issued by Brussels after the UK leaves.
  • Reuters: May calls on EU to move with Britain to open Brexit trade talks. British Prime Minister Theresa May repeated her wish on Friday to make a joint move with the European Union to open negotiations on a post-Brexit trade deal.

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