Morning Report: 29 August 2018
29th August 2018
GBP. The pound fell yesterday on news that a Theresa May would fight Boris Johnson’s leadership challenge as she aims at maintaining her position of power after the next general election. News also broke from the Telegraph that the Treasury office approached the Governor of the Bank of England, Mark Carney, in an attempt to get him to stay another year and fulfil the full 7-year tenure. With little in the way of data for sterling, the news has been focused more on the logistics of Brexit than the UK economy. With officials quietly agreeing that a deal won’t be made in principle by October and thus pushed back the Brexit deadline until mid-November, the theme of uncertainty and Brexit’s dominant force on sterling’s price action may continue for some time.
EUR. The euro was on a tear yesterday and made fresh one year highs against sterling, while the greenback had to concede its lowest point against the single currency in five weeks. The data that came out yesterday was not able to convincingly claim responsibility for this, as M3 Money Supply grew slightly less than expected at 4.0% year on year. More likely the Brexit uncertainty in the UK and the lessened trade tensions with the US, in combination with better survey data for the euro, sent the single currency to stronger levels recently. This morning the second reading of the Q2 French Gross Domestic Product came out exactly in line with the median forecast at 0.2%.
USD. The US dollar is on the offensive again this morning after a mixed day yesterday and two consecutive trading days of sharp decline before that. NAFTA negotiations continued to dominate headlines, with Finance Secretary Steve Mnuchin stating he sees few obstacles for a new trade deal with Canada. At the same time, he repeated a message earlier sent into the world by President Trump that it is too soon for renewed trade negotiations with China. This is a reminder that trade tensions may be on the retreat, yet still far from gone and possibly rising again as the topic becomes a political weapon for Trump as the mid-term elections in November draws ever closer. Almost unnoticed in the meantime, the Conference Board’s measure of Consumer Confidence came in well above expectations at 133.4. Today at 13:30 BST the second reading of Q2 GDP is released, which may see some volatility as the distribution of estimates for the first reading was unusually wide.
CAD. USDCAD reached new 2-month lows yesterday as the bilateral trade agreement between the US and Mexico increases the likelihood of a new NAFTA style multilateral negotiation being reached. Canada’s Foreign Minister, Chrystia Freeland, was positive after talks in Washington yesterday and this was reflected by the loonie continuing to make ground on the greenback. It has been leaked that a US Official said the deadline for an in-principle trade deal with Canada is Friday, and with Canadian officials willing to make concessions on dairy trade, the talks may begin to ramp up and help the Canadian dollar make further ground.