Morning Report: 26 May 2017

26th May 2017 By: Ranko Berich

GBP Sterling took another step down overnight, after Gross Domestic Product growth was revised downwards, and the latest polling data showed the Conservative Party’s lead in General Election polling had narrowed. There was little good news in revised GDP data for Q1 released yesterday, which reckoned growth to be at just 0.2%. There is a good chance growth picked up in the second quarter, but with falling real wages and dubious consumer spending, nothing can be taken for granted. The latest YouGov poll overnight showed the Conservatives at 44%, compared to 35% for Labour. The weight of pundit opinion is that an upset, or even anything short of a bloodbath, is impossible for the Labour party. But as last night’s price action shows, we’ve heard similar assurances about the impossibility of electoral disruption several times over the last couple of years.

EUR The euro has shown about as much energy as a sedated sloth this week, and yesterday was no exception, with the single currency ekeing out some further marginal gains versus sterling overnight. No data was released yesterday and many nations enjoyed Ascension day holidays. News reporters focussed, among other things, on the firmness of French President Emanuele Macron’s handshake with a certain manually challenged demagogue at yesterday’s NATO summit. No euro data will be released today.

USD USD enjoyed a small bump yesterday in a broad sense, but has struggled against EUR and JPY overnight. Yesterday’s economic data was largely inconsequential, with weekly Unemployment Claims once again exceptionally low, and Wholesale Inventories contracting in April. Today’s data will be more substantial; Durable Goods orders will be released at 13:30 BST alongside revised Gross Domestic Product growth.

CAD “Buy the rumour, sell the fact” is a well-worn cliche in currency markets, but the adage was a good description for developments in crude oil and loonie trading yesterday. OPEC reached a deal to extend production cuts of 1.8 million barrels a day, as expected, but evidently traders were expecting more, as crude oil prices tumbled on the news, taking the loonie down with them. The focus should now turn to production trends in North America. OPEC seems to be confident shale producers in particular will not be able to increase production significantly, and therefore that eventually global demand will lift prices.

UK news

  • FT. FBI investigates Jared Kushner’s Russia ties. Probe into links between Trump campaign and Moscow reaches US president’s son-in-law. The US Federal Bureau of Investigation is looking into connections between Donald Trump’s son-in-law Jared Kushner and Russia, in a sign that the probe into contacts between Trump campaign aides and Russian officials has moved closer to the White House.
  • Reuters. UK mortgage approvals slip in April, consumer borrowing speeds up – BBA May 25 British banks approved the fewest mortgages in five months in April and the value of home loans grew at the slowest pace since August, industry figures showed, adding to signs of a slowdown in the housing market. The figures from the British Banking Association also showed growth in consumer borrowing picked up a bit of pace last month as shoppers spent more on food over the Easter holidays. Britain’s economy grew strongly last year, but rising inflation since the Brexit vote in June 2016 has started to weaken consumer demand and house prices are rising more slowly.