Morning Report: 4 December 2017

December 4, 2017

GBP Sterling pared its gains from earlier in the week on Friday, and has not shown any signs of regaining momentum this morning. Depending on which headline you’re reading, Theresa May is either on the verge of striking a deal on the Irish border issue, or has failed altogether. The truth appears to be somewhere in the middle, with May heading to Brussels for lunch with Jean-Claude Juncker to present an updated offer that includes an updated and enlarged divorce settlement, with Ireland and the future role of the European Court of Justice remaining two potential sticking points. The day’s major data release will be the Construction Purchasing Managers’ Index at 09:30 GMT. The equivalent Services PMI will be released tomorrow, and later in the week Industrial Output data will be released on Friday.

EUR The euro has been out of the spotlight somewhat, with political and economic developments aplenty elsewhere in the G10, trading up against USD and GBP on Friday. Monthly Spanish jobs data has missed expectations this morning, while still showing a net increase in employment. Later in the morning at 09:30 GMT Sentix Investor Confidence will be released, followed at 10:00 by the Producer Price Index.

USD The dollar had a dramatic day on Friday, weakening after US media erroneously reported that Donald Trump’s former top aide, Michael Flynn, was prepared to testify against the President regarding the investigation in to Russian involvement in the Presidential elections. The report came from US news network ABC’s chief investigative reporter, Brian Ross, who was suspended after it was revealed that Flynn’s testimony did not, in fact, contradict the President, and the dollar subsequently recovered ground. Aside from this, the weekend’s big political news was the passage of tax reform legislation through the Senate, after a frantic day of deal making. The Bill will now go through a reconciliation process with that passed by the House of Representatives. Today at 15:00 GMT Factory Orders data will be released. Services survey data will be released by Markit and ISM tomorrow afternoon, and on Friday the Non-Farm Payrolls report will be released.

CAD Friday’s strong data releases brought a burst of strength to the loonie, which has lasted to this morning. Monthly net job creation was several times higher than expected, while Gross Domestic Product growth beat expectations for September. If performance that seen in Friday’s data was even partially maintained into the fourth quarter, it’s likely the Bank of Canada will look to tighten policy further as early as Q1 2018, a prospect that financial markets scrambled to price into Canadian fixed income and the loonie on Friday. Canada’s Trade Balance will be released tomorrow, followed by a rate decision from the Bank of Canada on Wednesday.

UK news

  • Guardian: Ireland: no go-ahead for Brexit talks to move on. The Irish government is not immediately ready to approve Brexit talks moving on to the next phase although progress has been made, an Irish minister said at the start of a crucial day for the negotiation process.
  • FT: Britain and EU on brink of Brexit divorce deal. Britain and the EU are on the brink of sealing a Brexit divorce deal on Monday, as Theresa May travels to Brussels with potential solutions in sight for the two biggest political obstacles to opening trade talks.
  • Telegraph: Retired detectives who made porn allegations against Damian Green could be prosecuted, Met chief says. Cressida Dick condemned the behaviour of former Scotland Yard officers after they spoke out about porn allegedly found on the the then Deputy Prime Minister’s computer during a raid on a separate matter in 2008.

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