Morning Report: 01 October 2018

1st October 2018

GBP. Sterling was relatively choppy last week and ultimately lost ground to both the euro and the dollar. This week looks like it is going to be as volatile for the pound with the Conservative Party Conference continuing until Wednesday, where it is considered leadership challenges may start to begin alongside further Brexit statements, and Purchasing Managers Indices are released throughout the week. Conservative Party conferences lead to multi-month lows for sterling in their 2 most recent editions, which may be on the cards again for this year’s happening as sharks continue to circle Theresa May and her already tattered Brexit plan.

EUR. After incurring losses against USD the euro is under pressure again this morning, with disappointing data and uncertainty in Italy both playing a role. On Friday Core Inflation underwhelmed for the second month in a row, showing Eurozone price pressures are having trouble to find lift off since the end of the Asset Purchasing Program was announced earlier in July. This morning German Retail Sales shrank for the 6th time in 8 months, hinting domestic demand in Europe’s largest economy remains frothy. This week sees the Final Manufacturing PMI at 9:00 BST and the Unemployment rate today at 10:00, with later in the week Producer Purchasing Prices on Tuesday and Final Purchasing PMIs on Wednesday.

USD. The Federal Reserve is now comfortably out of their media blackout period following last weeks 25 basis point rate hike. Multiple Fed speakers, including the Fed Chair Jerome Powell, are pencilled in for this week, giving us further insight into the tweaks made in their forward guidance measures last Wednesday. This weeks data calendar looks sparse for the dollar once the Fed members speeches are removed. The main top-tier data release of note is the release of employment figures on Friday at 13:30 BST.

CAD. The Wall Street Journal published an article late in yesterday’s session that stated the US and Canada reached a trade deal just hours before the deadline that the US and Mexico faced in order to send the text through to Congress. The loonie gained half a percentage point against the dollar over the weekend and has continued to make gains this morning as NAFTA uncertainty has been replaced with the USMCA trilateral trade deal. The data week for the loonie is back-loaded with employment data and the Trade Balance released on Friday at 13:30 BST.