Morning Report: 17 February 2017

17th February 2017 By: Ranko Berich

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GBP Sterling continued to bounce back against the US dollar yesterday, while selling off to the euro. No headline data was released, and today’s January Retail Sales report will be the next and only major sterling data for the week at 09:30 GMT. After sales contracted 1.9% in December most analysts are expecting a rebound in January, and indeed a second month of contraction could raise serious questions about the prospects for economic growth in Q1 2017, as consumer spending was the main driver of the economy in 2016 and a slowdown would indicate heightened inflation is beginning to bite.

EUR EURUSD rose steadily throughout the day yesterday, taking the pair well clear of Wednesday’s lows, while the single currency continued to make inroads against sterling. Yesterday’s meeting minutes from the European Central Bank were predictably tight lipped on the main dilemma confronting the Governing Council, stating that the ECB’s asset purchase program still had high levels of support. No signs emerged of a deal between eurozone creditors and the International Monetary Fund for the IMF to participate in the latest Greek bailout disbursement, raising the possibility that Greece will be unable to meet its next 7bn round of payments in July. Today at 09:00 GMT eurozone Current Account data will be released.

USD The week is ending with a whimper rather than a bang for USD, which was threatening to reach some significant highs against EUR earlier in the week but has since softened. The Trump administration remains in apparent disarray after the resignation of several key figures, possibly hampering confidence in policy driven growth in the near future. Yesterday’s US economic data remained fairly strong however, with Building Permits rising to 1.29m and Initial Jobless Claims remaining at historically low levels. The Survey based Philly Fed Manufacturing Index also exceeded expectations and showed a sharp increase in confidence among the survey paritcipants. Today at 15:00 GMT the Conference board’s Leading Index will be released.

CAD This week’s large increase in crude oil stockpiles has meant little for the loonie, which saw a burst of strength against USD yesterday that quickly receded. The move was driven by volatility in crude oil prices, as OPEC signalled a possible extension to the current supply reduction deal. Today at 13:30 GMT Foreign Securities data will be released.

UK news

  • Gauke defends changes to business rates Government hits back at ‘scaremongering’ ratings agents. A UK minister has rejected the growing chorus of complaints from companies about rising business rates, saying it was merely updating them to take account of market conditions and was raising no extra money. David Gauke, chief secretary to the Treasury, said it was right that businesses in areas that were prospering paid higher taxes. “They’re paying more because their rent has gone up, because they are in sectors that are flourishing or parts of the country that are flourishing,” he told the BBC Today programme on Friday morning.
  • EU workers in Britain drop in late 2016 after Brexit vote – Reuters A steady rise in the number of European Union migrants working in Britain stalled at the end of 2016, suggesting the Brexit vote, and the subsequent fall in the value of the pound, might have made the country less attractive as a place to work. The number of non-UK EU nationals employed in Britain fell by 19,000 in the final three months of 2016 from the previous quarter, to stand at 2.24 million. That was the biggest drop in any other October-December period since records began 20 years ago, official data showed. It compared with a rise of 12,000 in the same period of 2015 and a jump of 121,000 in the fourth quarter of 2014.