Morning Report: 25 November 2016

25th November 2016 By: Ranko Berich

GBP Sterling opens Friday’s session falling against all G10 FX at the time of writing. Theresa May is suffering somewhat of a backlash over some of her main reforms, after Bank of England’s Andy Haldane and GlaxoSmithKline’s CEO Sir Andrew Witty have rejected two of the main prime minister’s main corporate governance plans related to executive pay. The second estimate of the UK’s GDP showed no changes compared to the preliminary estimate, although imports quarter-on-quarter fell well above expectations. Today’s GDP figures comprise the first full quarter after the referendum and showed no signals whatsoever of Brexit effects. The CBI realized sales index is released at 11:00.

EUR The euro is recovering some against GBP and USD after several sessions of declines. The euro reached 1-year lows against the dollar this week and 2-month lows versus the pound. After hitting strong support levels it appears that the single currency is having a respite. But the next two weeks crucial events for the euro could quickly change the scenario. The Italian referendum takes place next Sunday, and it is followed by the ECB’s latest monetary policy decision. All considered, all events point towards increasing volatility levels in the sessions ahead.

USD Markets remained closed yesterday in the US and the USD is falling against most of the main crosses today, with the exception of GBP. US yields kept rising yesterday despite of Thanksgiving, and reached levels last seen in 2011. But the US 10-Year Treasuries yields are settling near mid-2015 highs ahead of the weekend, which is giving a reprieve to the recent USD rally. US stock exchanges will open today half day, and the S&P500 will start from historic highs. Trump’s expected stimulus program focused on infrastructure and lower corporate taxes boosted investors’ confidence, but the associated increase in inflation could, at some point, represent a threat to US stocks.

CAD The loonie fell yesterday morning against USD after headlines pointed that Russia will not collaborate in a reduction of crude oil production. However, it recovered in the afternoon and rallied overnight as selling pressure from the US is pushing the greenback lower from multi-year highs. This year drop in CAD is having repercussions in Canadian corporate profits, which increased 14% last quarter, the highest increase since the financial crisis. No data will be released in Canada today.

UK News

  • Reuters. British wage growth looks ‘dreadful’ after Brexit – IFS. Britain’s wage growth prospects look “dreadful”, a leading think tank said on Thursday, after official economic forecasts showed workers were unlikely to recoup losses suffered after the financial crisis within the next five years.
  • FT. Theresa May suffers backlash over flagship business reforms. Theresa May is facing a growing backlash over her flagship business reforms after leading company bosses and the Bank of England’s chief economist urged her to reverse plans on executive pay.