Morning Report: 27 November 2017

November 27, 2017

GBP Sterling has shrugged off the weekend’s headlines about ongoing Brexit negotiations to trade broadly flat vs USD compared to Friday afternoon, while avoiding further losses against the euro also. Politics will remain in focus this week, as Theresa May attempts to find a solution to the Northern Ireland border issue ahead of a crucial European leaders summit on the 14th December. In the meantime, Ireland’s Taoiseach Leo Varadkar is attempting to avoid a snap election, potentially complicating any negotiations. No data will be released today, but the Bank of England’s Chief Economist Andy Haldane will speak at 14:30 GMT. Later in the week, BoE stress test results will be released alongside the latest Financial Stability Report on Tuesday, and Manufacturing Purchasing Managers’ data will be released on Friday.

EUR The euro regained its mojo against both sterling and USD last week, as it the likelihood of Angela Merkel managing to hack together a coalition appeared to increase. The euro was further strengthened by the release of the German Ifo Business Climate survey, which showed business confidence in the eurozone’s largest economy is at all-time record highs. Politics will remain firmly in focus this week for the euro, as Merkel begins coalition talks with her former partners, the Social Democrats. Nonetheless, talks are expected to be protracted, and a conclusion seems unlikely this week. No euro data will be released today, and the calendar will see a slow start tomorrow morning with German Import Prices and Money Supply. Later in the week, the Flash Estimate of eurozone Consumer Price Index inflation will be released on Thursday.

USD The US heads back to work in earnest after Thanksgiving this week, and politics is likely to remain a key driver for USD, which remains on the back foot against the euro despite halting its losses on Friday night. Republican lawmakers are reported to be racing to pass Tax Reform legislation by the end of the year, meaning USD-relevant details may emerge throughout the week, though the vast majority of economists do not believe the tax plan as currently mooted will have a substantial beneficial effect on the economy. New Home Sales will be released today at 15:00 GMT, followed by a speech from the Fed’s Neel Kashkari at 22:30. Later in the week, preliminary Gross Domestic Product growth for the third quarter will be released on Wednesday, followed by the Personal Expenditures Price Index on Thursday.

CAD USDCAD traded flat on Friday compared to the day’s open, despite seeing some volatility during the day. The Bank of Canada’s latest Financial System Review will be published on Tuesday alongside some price indices, but the week’s main events for CAD will be an OPEC meeting on Wednesday, and monthly Gross Domestic Product and Labour Market data on Friday.

UK news

  • Reuters: No Irish border deal before EU trade agreement – British minister. LONDON (Reuters) – Britain will not resolve the question of the Irish border after Brexit until it has also agreed the outline of a trade deal with the European Union, the country’s International Trade Minister Liam Fox said on Sunday.
  • Guardian: White paper to set out industrial strategy in bid to boost UK productivity. The government is to highlight five key areas where the UK needs to improve its performance when it reveals on Monday the details of a new industrial strategy designed to increase productivity.
  • Sun: MAY COURT OUT Theresa May is thinking of handing the European Court of Justice a referral system for EU nationals in post-Brexit Britain. The Sun today reveals reports that she has held talks about a referral system to the ECJ for EU nationals who stay here. UK judges would refer a case to Luxembourg if a query arose on a point of law that has not previously been addressed during our time as a member state.

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