Morning Report: 25 April 2017

25th April 2017 By: Ranko Berich

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GBP. Sterling had a mostly uneventful day yesterday, continuing to move lower against the euro, which was up across the board on a reduction in political risk. The Confederation of British Industry’s Industrial Order Expectations survey was released, and showed that UK Manufacturers were experiencing strong orders from both at home and abroad. Cost pressures were a factor, with the weak pound and rising commodity prices meaning prices were likely to continue to rise. Today at 09:30 BST Public Sector Net Borrowing data will be released.

EUR. The euro continued to bask in the glow of the solid first round French election win for centrist Emmanuel Macron, although its gains versus the US dollar hit resistance quickly and EURUSD traded sideways through the afternoon and evening. Little headline euro data will be released today, and with Thursday’s important European Central Bank decision and Press Conference looming, it’s possible the euro rally may take a pause for now.

USD. USD has strengthened against the Mexican peso and Canadian dollar after the Trump administration announced new tariffs on Canadian lumber imports. The tariffs were announced after the administration concluded that lumber was subsidised in an unfair way. Canadian lumber imports are worth about $5bn a year, but the real implication of the announcement is the potential for further protectionism from the administration, which would mark a major change of longstanding US trade policy. Today at 14:00 BST, monthly House Price Indices from Case Shiller and the FHFA will be released. At 15:00, CB Consumer Confidence will follow, accompanied by New Home Sales and the Richmond Manufacturing Index.

CAD. The loonie came under pressure yesterday and remains so this morning, after the announcement of tariffs on Canadian softwood lumber from the Trump Administration. The Administration believes it has strong grounds for the tariffs, although claims have been rejected in NAFTA tribunals in the past. The move may ultimately turn out to be more of a political stunt than a move towards protectionism, but the potential for further sharp currency movements in the event of escalating trade disputes remains very significant. Meanwhile, monthly Wholesale Sales contracted 0.2% in Canada this February, unwinding some of the massive 3.0% surge seen in January.

UK news

FT: UK tries to put EU nationals off applying for residency. Home Office issues guidance to avert flood of applications after Article 50. The Home Office is trying to discourage EU nationals from applying for permanent residence in the UK to avoid being deluged by applications after the triggering of the Article 50 Brexit clause. According to new guidance released this month, EU citizens are instead advised to sign up for emailed news alerts that will tell them if and when they need to take action over their UK residence. However, there is no indication the British government is offering any new guarantees over their status post-Brexit.

Reuters: Weak pound boosts UK exporters, but Brexit weighs on investment – CBI. British factories saw their strongest export orders in six years in early 2017, helped by sterling’s fall after the Brexit vote, but they are also scaling back on investment plans, a survey showed on Monday. The Confederation of British Industry’s quarterly measure of manufacturing showed how last year’s referendum decision to leave the European Union has helped and hindered companies. UK producers enjoyed the biggest increase on record in their competitiveness in non-European Union markets in the three months to April. Domestic orders were buoyant too, rising at their fastest pace in nearly three years. But the weak pound was pushing up prices and unit costs rose at their strongest rate in six years.