Morning Report: 08 October 2018

8th October 2018

GBP. FX markets came to the conclusion that the chance rose of some sort of deal eventually being struck between the UK and EU on Friday as GBPUSD rallied 0.76%. Headlines suggested that negotiations over the Irish border may come to fruition soon; a contentious issue that has held up Brexit negotiations thus far. This week, the EU’s chief negotiator Michel Barnier is expected to release the EU’s proposal for a post-Brexit trade agreement and Brexit Secretary Dominic Raab is due in Brussels on Thursday. At some point during this week, the UK’s rejuvenated solution for the Irish backstop is expected to be released, with Gross Domestic Product being the only notable data release this week on Wednesday.

EUR. Euro held quite steady on Friday despite a continuous stream of hardline quotes about the Italian budget flowing from Deputy Prime Minister Luigi di Maio’s mouth. The single currency was even able to put some small plusses on the board against most major currencies before the weekend started. On Friday Di Maio strengthened his pledge to ignore signals the financial markets are sending as he stated that if it’s between the Italian people and Italian government bond yields, he would choose the first. A more detailed Italian budget is expected to be presented to Parliament on Wednesday, which may further concerns markets if Di Maio and his government do not adjust their current collision course. European Central Bank Meeting Minutes will be the main data release this week, coming in at Thursday.

USD. The dollar set itself up to find a new leg higher on Friday, but employment growth surprised to the downside and set the dollar off. Most of the losses have been contained today as the greenback starts the new week with a bout of strength. Some speculators are looking at the controversial approval of Judge Kavanaugh to the Supreme Court as the reason for this morning strong performance as some risk is removed from the global reserve currency. The DXY dollar composite index continues to teeter on its upper range in spite of a fairly light data calendar this week. This week, the Producer Price Index measure of Inflation is released on Wednesday with the Consumer equivalent released on Thursday. Fed members are scheduled to speak sporadically throughout the week.

CAD. The loonie rally that started after the new NAFTA deal was agreed upon earlier stalled somewhat last week, with CAD losing ground against USD for the fourth day in a row on Friday, while it finds itself under pressure this morning as well. Solid labour market data couldn’t keep the loonie from softening, despite the economy adding 63.3K jobs in September, more than the 25K expected. The data had more good news in store for the economy as the Trade Balance showed its first positive reading since March 2017, which is likely partially caused by the recent oil rally. Today is a bank holiday in Canada and apart from a speech by Bank of Canada Deputy Governor Carolyn Wilkins on Tuesday the Canadian data calendar for this week oozes out an icy calm.