Morning Report: 1 November 2016

1st November 2016 By: Ranko Berich

GBP Sterling has enjoyed a rally over the last 24 hours, as news emerged yesterday that Bank of England Governor Mark Carney would extend his term marginally to remain until mid-2019. The announcement was welcomed by the markets, who see Carney as a credible, stable figure, and the announcement helps remove another potential key reason to sell out of the pound. This morning’s main data release has been Markit’s Manufacturing Purchasing Managers Index, which showed the surveyed manufacturers still reporting strong activity growth, as the weaker sterling exchange rate boosted new export orders.

EUR Despite starting yesterday on the back foot the euro has managed to rally powerfully over the last 12 hours to reach a fresh high for the past week against USD this morning. Yesterday’s data was generally euro positive, with the Consumer Price Index rising 0.5% year on year, up from contractionary territory as recently as May, while the eurozone’s Gross Domestic Product rose 0.3% in Q3, as expected. Spain, France and Italy will observe the All Saints bank holiday today.

USD The US dollar is under pressure this morning, despite some reasonably firm economic data yesterday. Personal Spending and Income expanded as expected September, while the Core PCE Price Index, which is closely watched by the Federal Reserve, rose 1.7% year on year, compared to the Fed’s 2% target. The Chicago Purchasing Managers Index, a confidence survey, fell to 50.6, a meaningful drop in output reported by the surveyed businesses. Political turmoil only appeared to escalate, with senior Democrats attacking FBI Director James Comey’s decision to disclose details of FBI investigation into Hillary Clinton’s emails. Exacerbating the criticism are report that Comey had requested that details pertaining to Russian cyber-attacks on the US- perceived to be designed to support Trump- be kept quiet, “due to the proximity of the election”. Today’s data calendar will also be busy, beginning with Manufacturing PMIs released by Markit and ISM and 1:45 GMT and 14:00 GMT respectively, the latter accompanied by Construction Spending and Economic Optimism figures.

CAD Although crude oil prices continue to fall the loonie appears to have maintained a modicum of stability against the USD, avoiding falling to fresh lows yesterday. Today at 12:30 GMT monthly Gross Domestic Product data will be released, followed at 13:30 by the Royal Bank of Canada’s survey based Manufacturing Purchasing Managers Index. At 16:00 Bank of Canada Governor Stephen Poloz will speak in Vancouver.

UK News

  • Reuters. Bank of England Governor Mark Carney said on Monday he will stay in his job for an extra year until the end of June 2019 to help smooth Britain’s departure from the European Union, but he will depart two years short of a full term. Carney, who has come under heavy criticism from pro-Brexit politicians for warning before June’s referendum of the economic risks of voting to leave the EU, had the option to stay at the Bank until 2021.
  • FT. Pound picks up on Carney news, but concerns remain on BoE pressure. Sterling is rallying after Bank of England governor Mark Carney ended recent speculation about his future by saying he will extend his period as governor of the Bank of England to June 2019.