Morning Report: 5 February 2018

February 5, 2018

GBP Sterling was dragged down by political headlines over the weekend, most notably by Prime Minister Theresa May who ruled out the possibility of the UK staying in the European Union’s custom Union for good measures. Today at 9:30 GMT we have the Services Purchasing Manager Index, giving us some insights in the sector that makes up for 80% of the UK economy. Later this week we have the Bank of England rate announcement on Thursday, for which futures markets indicate that the Monetary Policy Committee may share some more hawkish views with the world than in its last press conference.

USD The greenback rallied on Friday after a solid January labour market report, with wage growth standing out; the highest year-on-year growth since 2009 at 2.9%. Meanwhile US equity markets sold- off more than 2%, the biggest sell-off in more than two years. The domestic political situation remains uncertain as Trump doesn’t miss a single chance to dominate the spotlights, this time by attempting to use a declassified memo to plead innocence in the Russia probe. At 15:00 GMT the ISM Non-manufacturing PMI is made public, while the rest of the US data calendar is quiet for the rest of the week.

EUR The single currency traded higher against most of its G10 peers on Friday, though it had to stomach a loss against the soaring USD. German coalition talks saw some delays over the weekend, though Angela Merkel remains confident that a final agreement on the grand coalition is within reach as talks between the parties resume this morning. European Central Bank President Mario Draghi will present an annual report to the European Parliament in Strasbourg today at 16:00 GMT.

CAD The loonie was one of the currencies that suffered the heaviest losses against the US dollar on Friday as the moves on the greenback coincided with softer oil prices, which dragged on CAD. Canadian labour market data shattered all expectations last time and on Friday, the newest edition will be published which tells us whether the Canadian labour market can sustain this buoyant state. On Tuesday the Trade Balance is released.

UK news

  • Reuters: UK rules out any form of customs union with the EU after Brexit – source. Britain has ruled out any form of customs union with the European Union after Brexit, according to a source in Prime Minister Theresa May’s Downing Street office.
  • Reuters: UK will not ‘surrender’ over bespoke Brexit deal with EU – minister. Britain will not “surrender” in its fight to win a bespoke deal with the European Union that would offer tariff-free trade as well as control over immigration, a minister said on Sunday before a crunch week for the government in Brexit negotiations.

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