Morning Report: 27 October 2016

27th October 2016 By: Ranko Berich

GBP Sterling is trading slightly down this morning, having retreated after a small surge in the wake of positive UK Gross Domestic Product figures in the third quarter. GDP rose 0.5% in Q3, compared to a expectations of 0.3%, and down from 0.7% in Q2. The services sector performed well, while production remained a net drag on growth. This is interesting because the lower pound and surging export orders suggest that the production sector could see some upside over the coming quarters. If production becomes a net positive contributor and services maintain momentum, we could be looking at a more robust economy than expected, especially if Philip Hammond delivers an increase to government spending. Political risk remains the main key for sterling, as today’s muted reaction to good economic news shows.

EUR The euro is again on the offensive against USD, and has even managed to make progress against sterling, despite good UK fundamental data. Yesterday’s euro data passed largely without incident, with Italian Retail Sales falling for the second consecutive month and GfK German Consumer Climate falling slightly short of expectations. This morning’s data has included better than expected Spanish Unemployment, which fell below 20% for the first time in six years. Eurozone Money Supply data also showed lending to the private sector increasing at a steady rate.

USD The greenback struggled to make further progress against the euro yesterday, after reaching a low on Tuesday, but remains firm against sterling this morning. Yesterday’s data included a smaller than expected deficit on the Goods Trade Balance, and a significantly better than expected print on the survey based Services Purchasing Managers Index. Top tier data will be released this afternoon in the form of monthly Durable Goods Orders at 13:30 BST, which will be accompanied by weekly Unemployment Claims. Pending Home Sales will be released at 15:00.

CAD CAD came under more pressure yesterday, continuing it’s losing streak in the wake of last week’s unexpectedly dovish Bank of Canada releases. Yesterday’s release of Crude Oil Inventory data in the United States showed a small decrease in stockpiles. However, this did little to support crude oil prices, which have been adding to the generally bearish tone on the loonie

UK News

  • Guardian. Theresa May under fire for secret talk of Brexit fears. Theresa May has come under intense criticism from politicians across the UK and Europe after it emerged that she had warned of the dangers of Brexit in a private talk at Goldman Sachs a month before the referendum vote.
  • Telegraph. Britain to send hundreds more troops to Russia border as Cold War tension escalates across Europe Britain will send hundreds more troops close to Russia’s border, the Government has said, as the Prime Minister also called for “pressure” on Moscow over the Syria crisis.