Morning Report: November 10 2016

10th November 2016 By: Ranko Berich

GBP:  Markets are rebounding powerfully this morning after yesterday’s election related volatility, and sterling has been a major benefactor against the euro, which has seen demand as a safe haven fade. There were few sterling specific stories moving markets yesterday, with the UK’s soaring goods trade deficit going largely unremarked. The same has been the case for today’s release of the ONS Annual Business Survey, which showed a continued expansion in the services sector in 2015, something strongly supported by the hard data.

EUR:  The euro is selling off this morning, especially against the US dollar, as fixed income is selling off across Europe and much of the developed world, reflecting an increase in inflation expectations. The spread between 2 year Treasuries and their German equivalents has risen to its highest level since October, indicating strong expectations of monetary policy divergence between the two economies. This morning’s biggest euro release was French Industrial Production, which contracted 1.1% after a 2.3% expansion in August. French payrolls expanded a sluggish 0.3% in the third quarter.

USD:  After a volatile reaction to Trump’s presidential election, the US dollar is very much on the front foot this morning, strengthening against the majority of the G10, although gains versus sterling have been rather muted. Many analysts concluded a Trump presidency would be USD negative initially due to the uncertainty that many of his policies, such as the renegotiation of NAFTA, $5 trillion in tax cuts, among others. But this appears to have been completely ignored, possibly due to markets assuming they were attention grabbing campaign statements and will not become policy. Time will tell. Today at 13:30 GMT weekly Unemployment Claims data will be released.

CAD: The loonie had a wild day yesterday, at first collapsing in the early morning, before rallying and then coming under pressure again. Crude oil prices were once again the primary driver, ultimately clawing back all of their Trump-related losses during a volatile session that saw Crude Oil inventories post another large increase in the United States. Today at 13:30 GMT the New House Price Index will be released.

 

UK news

FT:  Trump team moves to reassure world on transition. Advisers say Pence will play key role in drawing heavyweights to new administration. Senior Republicans sought to reassure the world that Donald Trump would oversee a smooth transition of power in Washington and bring in heavyweight figures to his administration after the political outsider’s stunning victory roiled markets and shocked US allies.

Reuters: UK trade deficit narrows in third quarter despite September overshoot. Britain’s trade deficit with the rest of the world narrowed in the three months to September, offering a boost to third-quarter growth, after a hefty fall in sterling following Britain’s vote to leave the European Union.