Morning Report: 22 May 2017

22nd May 2017 By: Ranko Berich

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GBP. Sterling came under pressure on the Asian open last night, and is trading lower versus the US dollar and the euro. Last week’s dramatic mini “flash crash” for sterling proved that the pound remains capable of surprising bursts of volatility. The weekend’s political news focussed on the unpopularity of Theresa May’s “dementia tax”, whereby the Conservative Manifesto outlined plans for making those with more than £100,000 in assets pay for home social care visits. This morning’s data has included the Rightmove House Price Index, which recorded a fresh all-time high for national asking prices. Theresa May will speak to the BBC today at 19:00 in an interview. Tomorrow at 10:00 BST senior Bank of England officials will testify to lawmakers on the Bank’s latest Inflation Report.

EUR. The euro is trading only slightly shy of Friday’s highs versus the US dollar, which were the highest levels seen on EURUSD since September. Strong eurozone data and political uncertainty in the US remains a powerful driver for the single currency, although no eurozone fundamental data will be released until tomorrow’s Manufacturing and Services Purchasing Managers Indices. The eurogroup of finance ministers will meet today, with the latest debt deal between Greece and its European creditors in focus.

USD. After a furtive rally on Thursday, USD was again on the back foot at the end of last week, and has barely rallied this morning. After a slow week last week the US calendar picks up again this week, beginning with a torrent of speeches from the Federal Reserve, especially from Neel Kashkari who will speak some four times over the first half of the week, beginning today at 15:30. Kashkari’s Federal Open Market Committee colleagues Harker and Brainard will speak at 15:00 and 00:00 tomorrowrespectively. Later in the week, minutes from the Federal Open Market Committee’s latest meeting will be released on Wednesday, followed by Durable Goods Orders on Friday.

CAD. The loonie strengthened against USD on Friday, as anticipation builds for this week’s crucial OPEC meeting on Thursday. The oil producer’s cartel faces something of a crossroads, with North American production picking up again after 2014’s sharp price falls. A failure by OPEC to credibly commit to production cuts would beg the question of whether the cartel continues to have monopolistic power over the oil market at all, meaning the stakes for the meeting could hardly be higher for crude oil markets. The Bank of Canada’s latest rate announcement will be released on Wednesday.

UK news

TELEGRAPH: Labour makes plea for students to register to vote by stressing manifesto pledge to abolish tuition fees. Labour has made a last-ditch plea for students to register to vote by stressing its manifesto pledge to abolish tuition fees as early as this September.

GUARDIAN: Pound hit by ‘dementia tax’ backlash. The backlash against the PM’s proposals for social care, and opinion polls showing the Tory lead narrowing to nine points, is causing some anxiety in the City this morning.

DAILY MAIL: Hepatitis danger from Full English breakfast… caused by EU meat: Sausage bug has been dubbed ‘the Brexit virus’. Tens of thousands of people are being infected with a potentially deadly illness after eating imported meat riddled with what has been described as ‘Brexit virus’. The strain of hepatitis E, which used to be mainly a tropical disease but has now mutated to infect livestock, causes a flu-like illness and in severe circumstances, could cause death.