Morning Report: 15 November 2016

15th November 2016 By: Ranko Berich

GBP Volatility is alive and well in FX markets this morning, with sterling selling off against USD and EUR after a relatively uneventful day yesterday that saw the pound drift lower against USD. Fundamental data is in focus for sterling this morning, with the release of Consumer Price data from the ONS. In addition to headline CPI, indices for Core CPI, which excludes food and fuel, as well as Producer Prices and House Prices will be worth watching. A bump to inflation due to the sterling depreciation recently seen is expected, but the exact breakdown of price developments may contain clues about possible future trends.

EUR The single currency has already mounted a comeback against USD and sterling this morning, as a raft of fundamental data releases hit the news wires. Preliminary data for German Gross Domestic Product growth in the third quarter showed the economy had slowed to 0.2% quarter on quarter growth, down from an already sluggish 0.4% in the second quarter. Similarly, French Consumer Prices changed 0.0% in October, continuing a trend of weak price pressure. At 10:00 GMT eurozone GDP figures will be released, accompanied by Trade Balance and the ZEW Economic Sentiment survey.

USD After starting the week very strong yesterday, USD is on the back foot this morning against many FX majors, as the short fixed income and long USD “Trump trade” falters. As with sterling and the euro, top tier fundamental data will be released today in the form of Retail Sales at 13:30 GMT. The Census Bureau report will be accompanied by the survey based Empire State Manufacturing Index, and by Import Price data. Later in the afternoon at 14:05 the usually dovish Federal Reserve Governor Daniel Tarullo will speak at the Wall Street Journal, and Business Inventories will be released at 15:00. At 18:30 Tarullo’s fellow Fed Governor Stanley Fischer will speak at the Brookings Institution on the topic of Bond Market liquidity, which has had many observers worried that tighter regulations and the rise of algorithmic market makers will result in more volatility in the important asset class.

CAD The USD pullback overnight has given the loonie an opportunity to rally from yesterday’s lows, with crude oil prices also mounting a small comeback. Developments elsewhere will hold sway over CAD today, with no data releases scheduled in Canada.

UK News

  • FT. UK inflation registers surprise fall in October to 0.9%. Britain’s headline inflation rate fell unexpectedly last month, pushed down by lower costs for clothing as consumer prices remained moderate despite the falling value of the pound. After leaping to hit a surprise 1 per cent in September, annual consumer prices fell to 0.9 per cent in October, below the 1.1 per cent rise economists had forecast ahead of the release.
  • Reuters. UK firms see slower hiring, weak pay growth on Brexit fears – CIPD. Fewer British employers expect to hire staff in late 2016 and will raise pay by less than inflation next year as the effects of the decision to leave the European Union set in, an industry body said on Monday.