Morning Report: 27 September 2016

27th September 2016 By: Ranko Berich

GBP Sterling is showing tentative signs of strength this morning, after GBPUSD found support above last week’s lows during yesterday’s trading session. Today’s session is important: if sterling can avoid falling to new lows against USD and EUR, a modest rally could become a prospect. Today at 11:00 BST the Confederation of British Industry will release its Realised Sales measure, which tracks same store retail sales.

EUR The euro did manage to reach a new one week high against USD yesterday afternoon, but pared its gains after the US Presidential debate, which saw some mild USD strength. Mario Draghi’s testimony to european lawmakers passed largely without incident yesterday, as the European Central Bank President gave the usual assurances about additional easing being available if necessary. Draghi also opined on Brexit, saying that the UK should not enjoy single market access until it subscribed to all “four freedoms” of the EU, including freedom of movement. This morning’s data releases have included German Import Prices, which contracted, and Eurozone Money Supply data, which expanded faster than expected.

USD After selling off against GBP and EUR yesterday afternoon, USD is on the offensive this morning against a majority of the G10 currencies. The greenback did weaken against the Mexican peso however, after last night’s first Presidential debate was perceived as a win for Hillary Clinton, and therefore a blow to the likelihood of a Trump presidency and potential diplomatic ramifications. With the Federal Reserve seemingly still uncertain about the prospect of a rate hike in the near future, fundamental data remains important to USD. This afternoon the Case Shiller House Price Index will be released at 14:00 BST, followed at 14:45 by the Flash Services Purchasing Managers Index. At 15:00 the CB COnsumer Confidence Index will be released, as will the Richmond Manufacturing Index. All of these indices are compiled from survey responses. At 16:15 BST the Fed’s Stanley Fischer will give a speech entitled “Why Study Economics?”.

CAD The loonie and other commodity currencies performed well versus USD overnight, ahead of today’s important informal meeting of OPEC members in Algiers. With oil prices stuck stubbornly below $50 a barrel, many OPEC members have spoken favourably of either freezing or reducing production in order to support prices. The roadblock has been Saudi Arabia, which has refused to participate unless its geopolitical rival Iran also cuts or freezes production. The Islamic Republic, in the meantime, has been attempting to regain market share lost during the sanctions period. Action is seen as extremely unlikely at today’s meeting, but even a firm indication that the cartel is moving towards taking action could send oil prices soaring.

UK News

  • Reuters. Clinton puts Trump on defensive in blistering debate. In signs that investors awarded the debate to Clinton also, Asian shares recovered from an early bout of nerves while the Mexican peso surged on Tuesday. Her chances in the Nov. 8 election improved also on online betting markets.
  • FT. BoE to buy corporate debt in latest QE round. The Bank of England will start buying corporate bonds on Tuesday when it launches its latest version of quantitative easing aimed at boosting the private sector. The bank will conduct three “reverse auctions” this week, each aimed at buying the bonds from particular sectors. Tuesday’s auction focuses on utilities and industries. Individual companies include automaker Rolls-Royce, oil major Royal Dutch Shell and utilities such as Thames Water.