Morning Report: 27 February 2018

February 27, 2018

GBP Sterling opened the week with a burst of strength yesterday morning, but the spin cycle moved to the wash stage fairly quickly, leaving sterling trading flat compared to Friday night against USD. Jeremy Corbyn achieved a rare feat for a labour leader yesterday by making a policy speech that was received well by business. Corbyn argued for UK membership of the EU customs union, winning praise from the Confederation of British Industry’s Carolyn Fairburn. UK Finance reported mortgage approvals rose for the first time in four months in January, although lending to consumers still fell. No UK data of note will be released today.

EUR The single currency experienced some mild intraday volatility against USD yesterday, but eventually closed slightly higher, a trend that continues this morning. Euro dipped shortly in the afternoon on the remarks of European Central Bank President Mario Draghi that moves in FX markets should be closely watched. Meanwhile insurance against euro weakness due to the Italian elections on Sunday is better bid on option markets, while the spot price of the euro seems largely unaffected by this so far. Throughout the day the German states release their February Consumer Price Indices one by one, followed by Spanish January CPI data at 9:00 GMT and German Bundesbank President Jens Weidmann, who speaks at 10:00.

USD The dollar had an uneventful day yesterday, at first selling off before catching a bid in the afternoon and evening. New Home Sales fell sharply in January, as higher mortgage rates began to weigh on demand. Today will see new Federal Reserve Chair Jerome Powell make his first testimony to lawmakers from the House Financial Services Committee. Last week’s Monetary Policy Report, which will be the subject of today’s testimony, offered little in the way of new information on Fed policy that was not made clear by recent meeting minutes, but today’s testimony will nonetheless by closely watched by markets. Powell will begin speaking at 13:30 GMT, while at the same time Durable Goods Orders will be released alongside Wholesale Inventories and the Goods Trade Balance. House price data will be released by S&P and the FHFA at 14:00, followed at 15:00 by the Conference Board’s Leading Index.

CAD The loonie had a rough day and fell against the entire G10 currency board, which also means it has now fallen against USD in six out of the latest seven sessions. The empty data calendar is unlikely to be the culprit of this, while also strengthening oil prices can hardly considered to be a suspect of causing loonie weakness. The seventh and final round of NAFTA negotiations which started on Sunday are more likely to be the main offender, as talks appear to be in a rut and which might have to be extended past the Mexican elections in June. Uncertainty flowing from this is likely to weigh on the loonie. Today’s major event will be the Federal Budget, released at 21:00 GMT.

UK news

  • Reuters: Sturgeon says Scottish parliament will not consent to May’s Brexit bill LONDON (Reuters) – Scottish First Minister Nicola Sturgeon said on Tuesday that the Scottish parliament would not consent to British Prime Minister Theresa May’s European Union (Withdrawal) Bill as outlined so far by ministers.
  • Financial Times: Pound’s recovery shows resilience over Brexit outcome Sterling has been best performing G10 currency over past six months.
  • ABC News: Italian election campaign leaves a third of voters undecided ahead of weekend poll Italians go to the polls on Sunday to elect a new government and a new prime minister. It’s one of the most unpredictable political contests in decades. The anti-establishment Five Star Movement, founded by comedian Beppe Grillo, is favoured to win the most votes, but is unlikely to be able to form a government on its own. Silvio Berlusconi’s Forza Italia has formed a right-wing coalition with the anti-immigration League and the Brothers of Italy. Together they might win enough votes to form government.