Morning Report: 16 November 2016

16th November 2016 By: Ranko Berich

GBP After a mild sell-off yesterday, sterling is again trading up versus both USD and the euro this morning. Yesterday’s inflation data was short of expectations, with headline Consumer Price Index inflation falling to 0.9% year on year. Core CPI similarly fell to 1.2%. The figures showed that the sterling depreciation seen in recent months has not yet filtered through to consumer prices, although the Producer Price Index did indeed surge, suggesting that moves in the CPI are likely in the near future. Mark Carney went another round with lawmakers from Parliament’s Treasury Committee, giving his usual aggressive defence of the Bank of England’s loose monetary policy. The BoE Governor called political attacks on the effects of monetary policy a “massive deflection exercise” by politicians to avoid copping the blame for low wage growth, rising inequality, and rising house prices, which are caused by fundamental factors more within the Government’s remit than the Bank’s. This morning at 09:30 labour market data including the Unemployment Rate and Average Weekly Earnings will be released.

EUR The euro remains on the back foot against USD, and is also coming under pressure against sterling this morning. Ample euro data was released yesterday, most notable, the flash reading for eurozone Gross Domestic Product growth in the third quarter, which showed the economy growing at a slow 0.3%.The eurozone’s trade surplus ballooned further, while German GDP missed expectations and Italian growth accelerated. The ZEW Economic Sentiment survey results were released, showing improving optimism among the surveyed investors and economists, especially in the Germany specific index. No headline euro data will be released today.

USD USD remains well bid across the board this morning, with sterling among the few major currencies able to eke out gains versus the greenback overnight. Retail Sales data showed consumer spending was very strong in September, with Core Retail Sales rising 0.8% in the month. Traditionally November is another strong month for consumer spending due to retailer discounts and the upcoming holidays. The Empire State Manufacturing Index showed reported output among the surveyed businesses creeping back into growth territory, while the Federal Open Market Committee’s Stanley Fischer played down concerns about bond market liquidity and spoke favourably about the prospect of fiscal easing under incoming President elect Trump. Today at 13:30 GMT the Producer Price Index will be released, followed at 14:15 by Capacity Utilisation and Industrial Production, and at 15:00 by the NAHB Housing Market Index.

CAD CAD finally rallied yesterday, as the latest reports of OPEC attempts at coordination on supply reduction hit the news wires. The loonie will finally see some relevant fundamental data today, with the release of Manufacturing Sales data at 13:30. United States Crude Oil Inventories will be released at 15:30, and the Bank of Canada’s Timothy Lane will speak in Ontario at 17:05.

UK News

  • Reuters. Bank of England’s Carney – Attacks on central bankers are ‘massive’ blame game. Bank of England Governor Mark Carney said verbal attacks by politicians on central banks, such as criticism by U.S. President-elect Donald Trump of the U.S. Federal Reserve, were a “massive blame-deflection exercise”. Carney has faced political heat in Britain for the BoE’s low interest rates while Trump, during the U.S. presidential election campaign, accused the Federal Reserve of keeping rates low due to pressure from the Obama administration.
  • FT. UK unemployment rate reaches fresh low but benefit claims rise. Britain’s unemployment rate has fallen to a fresh 11 year-low of 4.8 per cent but in a sign that the jobs market is not entirely healthy, benefit claims jumped by a greater than expected number last month. Economists had expected the unemployment rate to hold steady at 4.9 per cent for the period covering July to September but 49,000 more people were in work during the period than between April and June of this year. A total of 31.8m people were in work at the end of the second quarter.