Morning Report: 7 April 2017

7th April 2017 By: Ranko Berich

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GBP. A rather slow week on the markets looks set to end with a bang this morning after a round of US missile strikes on a Syrian airfield set off a risk-off move in global markets, sending oil and gold up alongside the Japanese Yen and other traditional safe haven assets. Sterling has been relatively unaffected by the morning’s events so far, after ultimately closing yesterday’s session slightly lower than USD. Today will be a busy day for the UK data calendar, beginning with the Halifax House Price Index at 08:30 BST. At 09:30 Industrial and Manufacturing Production data for February will be released alongside Construction Output and the Goods Trade Balance. Bank of England Governor Mark Carney will speak at Thompson Reuters at 10:00, and at 13:00 the National Institute of Economic and Social Research will release its estimate of Gross Domestic Product growth in March.

EUR. The euro saw a sharp burst of volatility yesterday morning, weakening as European Central Bank president Mario Draghi attempted to pour cold water on speculation that the ECB’s commitment to ultra-loose monetary policy was wavering. Draghi stated that “from today’s standpoint, I do not see cause to deviate from the indications we have been consistently providing in the introductory statement to our press conferences”. His comments were supported by a similar speech from ECB Chief Economist Peter Praet, but contradicted the very same day by Bundesbank head Jens Weidmann, who said it would be “legitimate” for the ECB to “consider monetary policy normalisation”. The euro bounced back against USD throughout yesterday morning before beginning to deteriorate again. In comparison to the contradictory live speeches from senior policy makers, yesterday’s release of ECB meeting minutes held little new information. This morning’s data has included a 2.2% expansion in German Industrial Production.

USD. USD took a small step back against traditional safe haven currencies such as JPY and CHF in the wake of this morning’s missile strike, but has since bounded back. The geopolitical consequences of this morning’s events are not yet clear. Russian forces in Syria were alerted to the strike to avoid an escalation, but a more muscular approach by the US to the region could result in further risk-off moves in markets, as could a flare up over North Korea, where Trump has already threatened “unilateral” action. For now fundamental data is likely to come back into focus for USD, with this afternoon’s release of the March Non-Farm Payrolls figure at 13:30 BST. Expectations for job creation are rather low – most forecasts are for below 200,000 jobs, despite a strong reading on Wednesday’s ADP estimate of job creation. Moves in the Average Hourly Earnings Index will also be worth watching, with the labour market increasingly tight and the Federal Reserve considering further removal of monetary accommodation.

CAD. The loonie rallied over the course of yesterday against USD, and was given a further boost by this morning’s events, which saw crude oil prices surge to their highest level since early March. Yesterday’s data included February Building Permits, which contracted 2.5% after the sharp 5.8% expansion in January. Canadian labour market data including the Employment Change and Unemployment Rate will be released at 13:30 BST today, followed at 15:00 by the Ivey Purchasing Managers’ Index.

UK news

FT: Trump launches military strikes against Assad’s Syria. Missiles hit air base the US believes carried out gas attack that killed more than 70. US President Donald Trump has taken the first major military action of his presidency by ordering the launch of dozens of Tomahawk missiles at Syria in response to the gas attack this week that claimed the lives of more than 70 people. “I ordered a targeted military strike on the airfield in Syria from where the chemical attack was launched,” Mr Trump said. “It is in the vital national security interest of the US to prevent and deter the spread or use of deadly chemical weapons.” Speaking at Mar-a-Lago, the West Palm Beach resort where he was hosting Chinese President Xi Jinping, Mr Trump said he had ordered the military strike because Syrian President Bashar al-Assad had conducted a “horrible chemical weapons attack on innocent civilians” with a deadly nerve agent.

FT: UK house price growth stagnates in March – Halifax. Growth in UK house prices was flat last month, defying expectations of a small uptick, according to Halifax.The average British property price is now £219,755 according to the survey, which reported a 0.1 per cent rise in prices in the three months to March. That is the lowest quarterly pace of growth since the autumn of 2016.