Morning Report: 7 June 2017

7th June 2017 By: Ranko Berich

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GBP. Sterling operates within a tight range ahead of this week’s General Election. Narrowing polls over the last four weeks clearly had an impact on the currency, as these now appear to suggest that the outcome may not be as different from the 2015 elections. Sterling had initially rallied after the announcement of a snap election in mid-April as markets understood the Tories would consolidate a much stronger government. The first exit polls will be released tomorrow at 22.00 BST with the final result will being announced over the course of Friday morning.

EUR. The lack of action in the Eurozone this week and attention focused on tomorrow’sEuropean Central Bank meeting is weighing on the single currency, which remains near 9-month highs against USD. However, much weaker than expected industrial output figures in Spain and Germany and Italian retail sales are adding some pressure to the single currency.

USD. The US dollar index DXY reached a 9-month low yesterday after US 10-year yields fell to the lowest levels since the aftermath of the US elections. Weak economic indicators explain the drop in yields. The Personal Consumption Expenditure index eased for the third consecutive month last week, and wages followed the same fate. As a result, the Fed could refrain from anticipating more hikes, although we continue to expect the central bank to deliver an increase in the Fed funds next week.

CAD. As we indicated at the beginning of the week, the loonie continues to be favoured by better than expected economic data last week and an upbeat Bank of Canada, which dominate the Canadian dollar crosses despite falling crude oil prices since the last week of May. Building permits data will be released at 13.30 BST, expecting a modest rebound from last month’s contraction.

UK news

FT: Theresa May ramps up anti-terror rhetoric in final election push. PM seeks to quell criticism over security as confident Tories target Labour heartlands. Theresa May has vowed to restrict the freedom of movement of terror suspects, as she tried to allay criticism of her handling of the security threat ahead of a final push for votes in Thursday’s general election. Mrs May will on Wednesday embark on an eleventh-hour tour of closely fought Labour-held constituencies amid Conservative confidence that she is heading for a solid election victory in spite of a struggling campaign.

BBC: House price growth cools further in May, says Halifax. The annual rate of house price growth is continuing to slow, according to the UK’s biggest mortgage lender, the Halifax. In the year to May house price inflation fell to 3.3%, down from 3.8% in the year to April. Over the last three months there has been virtually no change in prices, the Halifax said. Since March property prices have fallen by 0.2%, it added. Between April and May, prices actually rose by 0.4%.