Morning Report: 10 May 2017

10th May 2017

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GBP. After coming under pressure in the morning, sterling saw a reversal yesterday afternoon and began to rally, and has seen further gains this morning, particularly against USD. No headline data will be released today, as markets look ahead to tomorrow’s “super Thursday” events with the Bank of England. A move towards tighter policy is hardly likely, but tomorrow’s Inflation Report will offer the BoE the change to revise its outlook for the economy, potentially in a slightly more hawkish direction given resilient economic growth, rising inflation, and an improving labour market.

EUR. EURUSD trended downwards over the course of yesterday, but has stabilised somewhat during a quiet overnight session. A couple of mid-tier data releases have already been released this morning, in the form of decent monthly French Industrial Production data and a smaller than expected Trade Deficit for France, and Italian Industrial Production is due at 09:00 BST. However, the day’s biggest event for the euro will be an appearance by European Central Bank President Mario Draghi to Dutch lawmakers, at 13:00. Draghi is likely to give his usual robust defence of the ECB’s loose monetary policy. Nonetheless, the rising level of inflation in the eurozone seen since the ECB’s last press conference has potentially given lawmakers better ammunition to press Draghi on whether the outlook has now changed.

USD. USD is lower on a broad basis this morning, after news that FBI director James Comey had been dismissed from office by Donald Trump. Although the ostensible reason for the dismissal was due to revelations that Comey had misled a Congressional enquiry last week, as the FBI is currently investigating contacts between the Trump campaign and Russian officials, questions have been raised about the dismissal being politically motivated. Yesterday’s data included a strong print for monthly Job Openings data, which showed open positions in the economy at their highest level since September 2016. Little US data will be released today, apart from Import Prices at 13:30 BST.

CAD. USDCAD whipsawed with crude oil prices in choppy trading conditions yesterday evening and afternoon. Reports emerged of a marginal reduction in planned Saudi Arabian crude oil exports to Asian markets, following on from Monday’s reports that OPEC production cuts could be extended into 2018. The American Petroleum Institute reported a substantial fall in weekly crude supplies, placing more emphasis on today’s headline release of North American inventory data from the US Energy Information Administration at 15:30 BST.

UK news

FT: Trump fires FBI director James Comey. Washington stunned by dismissal while bureau probes Trump campaign ties to Russia. President Donald Trump has fired James Comey, the director of the Federal Bureau of Investigation and the man overseeing the agency’s investigation into contacts between the Trump presidential campaign and Russian officials. The White House said Mr Trump “terminated” Mr Comey with immediate effect following advice from Jeff Sessions, the attorney-general, and his deputy Rod Rosenstein. Mr Trump informed Mr Comey in a letter delivered by a White House aide, writing: “While I greatly appreciate you informing me, on three separate occasions, that I am not under investigation, I nevertheless concur with [their] judgment?.?.?.?that you are not able to effectively lead the bureau.”

FT: UK tech investors face loss of significant funding after Brexit. EU venture capital body cuts activity in Britain after triggering of Article 50. British technology investors face being cut off from Europe’s largest single source of venture capital funding, in a sign that the UK’s relationship with European institutions is weakening even before its official exit from the EU. The European Investment Fund, a public-private partnership which accounts for more than a third of investment in UK-based venture capital funds, is slowing its activity in Britain and turning away funds that may have otherwise been eligible for investment, according to industry figures.