Morning Report: 8 December 2017

December 8, 2017

GBP Sterling enjoyed a night to remember after a breakthrough in the first stage of the Brexit talks helped the British pound to rally from yesterday’s miasma. European Commission President Jean-Claude Juncker has stated he will tell the European leaders at the European Council meeting next week that “sufficient progress” has been made for the talks to move to the next stage of Brexit talks about the future trade relationship between the European Union and the UK. The deal itself may be a bit of a fudge, in that the key issue of the Irish border has been essentially left for later, but nonetheless represents a breakthrough as trade talks can now begin. Today at 9:30 GMT we have the Manufacturing Production and Goods Trade Balance, though these releases may be overshadowed by more details about Brexit negotiations.

EUR The Single currency was down across the board yesterday, except for the Swiss Franc and the Japanese Yen, which is suggests the euro weakness may have been related to a global move towards riskier assets. Eurozone data saw a miss with the German Industrial Production contracting with 1.4% in October, sharply lower than the expected growth of 0.9%. This morning we saw German Trade Balance printing slightly weaker than expected, with a surplus of 19.9 billion in October. The rest of the data calendar for the Eurozone is empty today.

USD USD traded only slightly higher against the euro yesterday, and lost ground to sterling as the tide of Brexit news turned, yet it managed to put a fifth consecutive daily increase on the board for the DXY dollar index. After announcing his intentions to move the US embassy in Israel to Jerusalem earlier this week Trump continues to dominate the headlines by signalling he intends to reveal his infrastructure spending plans in January. Given tax reform legislation has finally passed, the promise may end up being taken with a little less salt by market participants. Yesterday Initial Jobless Claims came in around expectations with 236.000 initial claims in the week that ended on the second of December. This afternoon the Non-Farm Payrolls report will be released at 13:30 GMT, which analysts expect to show solid growth in average earnings.

CAD The loonie gradually lost ground against the dollar yesterday, along with most of the G10. Building were stronger than expected, growing 3.5% in October while September’s numbers were revised to 4.9%. The growth was broad based among various components with residential, commercial and industrial permits all adding to the growth, indicating there is still a large willingness to invest in the Canadian real estate sector. The Ivey Purchasing Manager Index came in at target at 63.0, slightly down from 63.8 last month, but still comfortably in growth territory. Today at 13:15 GMT Housing Starts will be released, followed at 13:30 GMT by Capacity Utilization Rate.

UK news

  • Reuters: UK manufacturing expands for sixth month in October, best run for at least 20 years. LONDON (Reuters) – British manufacturing output expanded for the sixth month in a row during October, the longest such run in at least 20 years, helped by the production of cars for export.
  • Guardian: Four in 10 right-to-buy homes are now owned by private landlords. Four out of 10 council homes sold under Margaret Thatcher’s flagship right-to-buy policy are now in the hands of private landlords, with their tenants paying more than twice the rent levels charged by local authorities.
  • Daily Mail: I will NOT back down: Defence Secretary stands his ground. The Defence Secretary stood his ground last night in the face of a furious row over his suggestion British terrorists should be killed.

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