Morning Report: 26 February 2018

26th February 2018

GBP After a mixed week last week sterling has opened this morning with strength, amid ongoing political posturing from all sides relating to Brexit. After Theresa May’s strategy of “managed divergence” with EU standards emerged last week, various national and EU leaders formed the usual chorus of objections, with European Council President Donald Tusk calling the proposition “pure illusion”. Jeremy Corbyn’s Labour Party, in the meantime, appears poised to support a “soft Brexit” involving membership of the EU customs union. Brexit is likely to remain in the headlines this week, ahead of a landmark speech from Theresa May on Friday. Today at 09:30 GMT lending figures will be released by UK Finance, and the Bank of England’s Jon Cunliffe will speak at 18:00.

EUR The single currency closed a soft week of with a weak performance on Friday with losses against sterling as well as USD. The Final Consumer Price Index Figures came in exactly on expectation at 1.3% for January, which is still miles away from the European Central Bank’s 2% target. This week the direction euro will take is likely to be determined by headlines related to the Italian elections and the vote of the German SPD members about the Grand Coalition agreement. Mario Draghi testifies before members of the European Parliament this afternoon at 14:00 GMT and on Wednesday CPI Flash Estimates for February are published.

USD USD also had a rather indecisive week last week, although on a broad basis it did show some signs of strength. The path of inflation and how the Federal Reserve will respond seems to be at the crux of how markets treat USD, and so this week’s key events will be testimony by newly appointment Fed Chair Jerome Powell to lawmakers. Powell will speak to lawmakers from the House tomorrow at 13:30 GMT, and the Senate at 15:00 on Thursday. As if to set the stage for his testimony, updated GDP data will be released on Wednesday, followed by Personal Consumption Expenditures Price Index on Thursday. New Home Sales data will be released today at 15:00 GMT.

CAD The loonie found some strength against the greenback on Friday after three consecutive days of losses earlier in the week. Canadian January Consumer Price Index rebounded firmly after December’s unexpected drop and grew with 0.7% in January. This week the Canadian Current Account on Thursday and the monthly GDP reading is made public on Friday.

UK news

  • Reuters: Corbyn piles pressure on May over Brexit as Labour pledges customs union British opposition leader Jeremy Corbyn is due on Monday to support staying in a customs union with the EU after Brexit, a move that could lead to a major parliamentary defeat for Prime Minister Theresa May.
  • Guardian: Angela Merkel’s CDU to vote on German coalition deal. Germany’s Christian Democrats (CDU) will meet to approve a coalition deal with the Social Democrats (SPD) that will take their leader, Angela Merkel, a step closer to a fourth term as chancellor in Europe’s biggest economy.