Morning Report: 30 March 2017
30th March 2017 By: Ranko Berich
GBP. Yesterday was a historic day for Britain, but a mostly forgettable one for sterling, as the formal activation of the Brexit process by Theresa May’s government added little new information for forex markets about the likely outcome of negotiations, and the pound ultimately saw less movement than on Tuesday. Theresa May’s statement upon the delivery of her Article 50 letter to Donald Tusk did acknowledge the UK would pay a price for Brexit, but was interpreted as containing a veiled threat that Britain’s co-operation on security will be contingent on other elements of negotiations, such as trade, a warning that was immediately criticised by European leaders. If May decides to play it tough with the EU, at first glance it appears the continent also has a few cards to play – such as 13% or so of Britain’s GDP that is due to exports to the EU, compared to an average of around 4% of EU countries’ GDP from exports to the UK. No sterling data will be released today, but the political fallout of yesterday’s events may well only just be beginning.
EUR. The euro weakened yesterday despite some favourable political developments in France, as the US dollar continued to challenge the single currency’s recent gains. Centrist candidate Emmanuel Macron took a solid lead in a presidential poll released by several pollsters, all of which showed Macron winning the second round of the election by a margin of more than 20 percentage points. Polls have been wrong in recent history for at least two very important electoral events, but for now at least the margins against Eurosceptic Le Pen appear to be working in favour of the single currency. Throughout the morning, German Consumer Price Index data will be released on a regional basis, culminating in Germany Wide CPI at 13:00 BST.
USD. The US dollar Index DXY continued to appreciate yesterday, breaking above the important 100 level. Pending Home Sales jumped to their second highest level in over a decade in February, joining a plethora of economic indicators that are reaching multi year highs such as this week’s CB Consumer Confidence reading. FOMC members Williams and Rosengren maintained the generally hawkish tone of Federal Reserve messaging, with Rosengren saying he saw three further hikes this year and Williams discussing the possibility of balance sheet contraction after 2017. Today at 13:30 GMTUS Gross Domestic Product data will be released alongside weekly Unemployment Claims, which have also been hovering near multi decade lows.
CAD. Crude oil prices continued to rally yesterday, taking the loonie up with them for another session. North American crude oil inventories expanded by 0.9 million barrels, a slightly smaller build up than expected which was enough to see crude spot prices rise. Today at 13:30 BST price indices for Raw Materials and Industrial Products will be released.
FT: Brexit minister to lay out plan for repatriating EU laws. Davis plays down difficulty despite breadth of regulations needing new legislation. The UK government on Thursday will publish a white paper setting out its plan to repatriate the EU’s legal regime into Britain’s law books through a Great Repeal Bill that will require up to 1,000 separate statutory instruments. David Davis, Brexit secretary, has played down the difficulty of repealing existing regulations from Brussels and replacing them through UK law. He defended the process the government will use, which will involve secondary legislation that receives limited parliamentary scrutiny. Speaking to the BBC on Thursday morning, Mr Davis said he expected the repeal bill to simply cut and paste EU law on to the British statute book, so that a post-Brexit trade deal with Brussels could be struck more easily.