Morning Report: 12 December 2016

12th December 2016 By: Ranko Berich

GBP Sterling strengthened against the euro on Friday, but has come under pressure this morning. A raft of fundamental data will be released this week, including Price Index data tomorrow, and Labour Market data including the Unemployment Rate and Average Earnings Index tomorrow. The Bank of England’s latest rate decision will be announced on Thursday, accompanied by a Monetary Policy Summary, although without a Press Conference and Inflation Report this won’t quite count as a “Super Thursday” and the BoE may avoid changing much of its assessment of the economy.

EUR The euro fell against USD and other currencies after last week’s European Central Bank extension and trimming of Quantitative Easing, but is rallying this morning. No euro data will be released today, but the week’s data calendar does feature a number of important releases including the results of the ZEW Economic Sentiment survey tomorrow, and Manufacturing and Services Purchasing Managers Indices on Thursday. Eurozone Consumer Price Index inflation will be released on Friday.

USD Despite a mild sell off against the euro this morning USD is holding on to the majority of its gains from last week, as anticipation builds for Wednesday’s crucial Federal Open Market Committee events. The Fed is widely expected to raise interest rates by some 25 basis points on Wednesday, and so the market impact of this widely anticipated move may be limited. But the latest FOMC member Economic Projections will make for interesting reading, as it’s possible members may have become more hawkish in recent months due to sustained labour market strength and the prospect of fiscal easing from the incoming Trump administration.

CAD The Canadian dollar has jumped at the beginning of the Asian session overnight, after OPEC not only confirmed the initial crude oil supply cut announced last month, but actually went beyond the initial terms and announced a bigger-than-expected cut that includes non-OPEC Russia. Saudi Arabia has announced that they will cut production below 10 million barrels/day and Russia plans to reach a 300.000 barrel/day production reduction by May 2017. OPEC has a long track record of taking a creative approach to accounting for supposed supply reductions, but nonetheless last weekend’s announcement is likely to propel petro-currencies, including the loonie.

UK News

FT. UK’s largest companies gloomy on 2017 economic prospects. The UK’s largest public companies are profoundly gloomy about the country’s economic prospects in 2017, according to research published on Monday. The most recent Boardroom Bellwether, conducted twice a year by ICSA, the governance body, in conjunction with the Financial Times, found that three-quarters of FTSE 350 company secretaries surveyed expected UK economic conditions to deteriorate during the next 12 months. Only 8 per cent expected a “slight” improvement, and none expected a significant uptick.

FT. Free trade is key to the UK’s prosperity after Brexit. Britain can lead the free trade in goods and services at the centre of global growth. There is tremendous uncertainty across the world. Electorates in the EU are increasingly tempted by radical populists from the left and right. President-elect Donald Trump has pledged to scrap or renegotiate the US’s largest trade deals, which have been in the preparation for years. Institutions that are the product of the postwar political centre ground are now discredited.