Morning Report: 28 September 2016

28th September 2016 By: Ranko Berich

GBP After reaching fresh lows on Monday against USD and EUR, sterling rallied slightly yesterday. However, Bank of England policy maker Minouche Shafik spoke this morning suggesting that further easing is likely in the near future and sterling pared last night’s gains. The Confederation of British Industry’s Realised Sales measure was released, showing that retail sales among the surveyed businesses remained in contraction, a result that is at odds with official retail sales data, which continue to show an upward trend in consumer spending.

EUR The euro took a turn lower yesterday, reversing the recent upwards trend seen on EURUSD and giving the pound a chance to claw back some of the sharp losses seen recently on GBPEUR. The European Central Bank’s Philip Lane said late last night that “forceful” easing was still necessary, underlining the fact that continuation of the ECB’s current programme is not a given and is opposed by certain influential Governing Council Members. This morning the widely followed GFK Consumer Confidence survey was released, showing confidence remaining low due to Brexit and terror threats. Today at 15:30 BST ECB President Mario Draghi will speak to the German Bundestag in a potentially explosive session, given the opposition many Germans feel towards the ECB’s loose monetary policy.

USD The greenback is stronger versus most G10 currencies overnight, and has made some notable progress against the euro over the last 24 hours, reversing the downwards trend seen over the course of last week. Today will be about talking for USD, with a raft of Federal Reserve speakers scheduled and Fed Chair Janet Yellen herself due to testify to lawmakers. Durable Goods Orders will be the afternoon’s sole data release at 13:30 BST, while the Fed’s Bullard, Evans, and Mester will speak at 15:15, 18:30 and 21:35 respectively. Chair Yellen’s testimony to the House Panel on Banking Supervision is scheduled for 15:00, and as always has the potential for sparks to fly as lawmakers look to score points during a time of high political tension in the United States.

CAD Despite some intraday volatility USDCAD ultimately closed very near to where it opened yesterday. It’s a big day today for the loonie and other crude oil linked currencies, as OPEC members informally meet in Algiers. No formal action is expected today, but it’s possible the oil producing cartel may finally give a firm indication that its members have the political will to support oil prices by cutting or freezing production. Saudi Arabian sources yesterday said that the Kingdom may accept higher production among some rivals, although given the opaque nature of OPEC discussions anything is possible at today’s meeting.

UK News

  • Reuters. Bank of England Deputy Governor Minouche Shafik said she expected the central bank would need to pump more stimulus into Britain’s economy “at some point” as it adjusts to the shock of the vote to leave the European Union. “There is no doubt in my mind that the UK is experiencing a sizeable economic shock in the wake of the referendum,” Shafik said in a speech she was due to make on Wednesday.