Morning Report: 7 February 2018

February 7, 2018

GBP Sterling closed flat against USD yesterday, quickly recovering after a mid afternoon sell-off. Global equity markets remained in turmoil, with choppy trading patterns continuing overnight. Brexit headlines of the usual size and shape circulated in the major papers, regarding European Commission plans to limit UK access to the single market, as well as requirements for avoiding a hard border in Northern Ireland.

EUR The euro had a volatile session against USD yesterday, ultimately closing flat after several swings. German Chancellor Angela Merkel’s CDU negotiated through the night over the terms of a new coalition agreement with the SPD, with no breakthrough. This morning’s main euro release was German Industrial Production, which contracted 0.6% in December after rising more than 3% in November.

USD Equity markets and global risk appetite have been the theme of this week’s dollar trading, as the greenback has generally performed well during periods of intense concern about equities. The dollar index DXY traded flat yesterday, with a midday surge quickly coming undone. The Trade Balance fell further into deficit in December, as strong consumer spending meant that record exports were insufficient to improve the overall balance. Job Openings fell in December, while remaining at high levels compared to historical levels and the overall tightness of the labour market. Headline US data will be scarce today, although the Fed’s Dudley will speak at 13:30 GMT.

CAD After selling off heavily on Monday the loonie pared back some of its losses yesterday. Canada’s Trade Balance fell further into deficit in December, matching a trend seen in the United States, as strong import growth exceeded exports. The Ivey Purchasing Managers’ Index fell to 55.2, reflecting survey optimism that remained high, but lower than the last reading. Building Permits will be released today at 13:30 GMT.

UK news

  • Reuters: Britain tells business: We cannot guarantee your Brexit future.  Britain cannot tell businesses for certain what its future relationship with the European Union will be once it leaves the bloc, business minister Greg Clark said on Wednesday, ahead of government talks on its approach to Brexit.
  • Telegraph: Ireland digs in over Brexit border question in renewed threat to talks. Ireland is pushing for a settled “legal text” over the border question as early as next month in a move that threatens once again to derail the Brexit negotiations, The Daily Telegraph has learned.
  • Guardian: First modern Britons had ‘dark to black’ skin, Cheddar Man DNA analysis reveals. The first modern Britons, who lived about 10,000 years ago, had “dark to black” skin, a groundbreaking DNA analysis of Britain’s oldest complete skeleton has revealed.

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