Morning Report: 6 December 2017

December 6, 2017

GBP Sterling has continued to sell off over the past twenty four hours, being weighed down by continued Brexit uncertainty. Theresa May’s Government scrambled to recover after Monday’s scuppering of a potential deal on the Irish border by the Northern Irish Democratic Unionist Party, with Brexit Minister David Davis clarifying in Parliament that the phrase “regulatory alignment”, which was one of the main objections of the DUP, was meant to apply to the whole United Kingdom, not just Northern Ireland. Negotiations and maneuvering will continue today, while the Telegraph is reporting this morning that Theresa May is once again facing internal dissent from Cabinet members including Boris Johnson and Michael Gove. Yesterday’s Services Purchasing Managers Index release for sterling went largely unnoticed, but showed a dip in the confidence reported by survey respondents.

EUR The euro came under pressure yesterday, including against USD where it reached its lowest level in more than a month. Aside from the morning’s Purchasing Managers’ Index released, which showed a solid level of expansion in the services sector, monthly Retail Sales fell well short of expectations, contracting 1.1% in September after a 0.8% jump in August. This morning’s data has included a good print for German Factory Orders, which rose 0.5% in October, after rising 1.2% in September. Retail PMI at 09:10 GMT is the morning’s other major release.

USD The US dollar had a solid day yesterday, making inroads against sterling and euro, while the weighted dollar index DXY was up as well.The US Trade Balance deteriorated significantly in October, with exports down 1.8% and imports rising 1.3%. This deterioration was likely enough to negatively impact US growth in the fourth quarter. The November ISM Non-Manufacturing Purchasing Managers’ Index fell compared to last month, though there’s little cause for concern since the score of 57.4 is still in the vicinity of last month’s reading, which was the highest in 12 years. Today at 13:15 the ADP Non-Farm Employment Change will be released and at 15:30 Crude Oil Inventories will be published.

CAD The loonie reached a fresh high against USD yesterday afternoon on more firm trade data, before paring back its gains slightly later on. Canada’s Trade Balance deficit shrunk to just 1.5b in October, fuelled by a strong increase in exports to the US. Today at 15:00 GMT the Bank of Canada’s latest rate decision will be announced, although a change in the rate or messaging seems rather unlikely.

UK news

  • Telegraph: Boris Johnson and Michael Gove lead Cabinet revolt against Theresa May over fears she is forcing a soft Brexit. Theresa May is facing a Cabinet revolt after Brexiteers led by Boris Johnson and Michael Gove expressed “genuine fear” the Prime Minister is trying to force through a soft Brexit.
  • Guardian: MI5 and police ‘thwart plot to assassinate Theresa May’. Security officials believe they have thwarted an alleged plot to assassinate Theresa May by terrorists who would first bomb their way into Downing Street and then kill the prime minister, it has emerged.

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