Morning Report: November 14 2016

14th November 2016 By: Ranko Berich

GBP: After a surge on Friday, sterling is continuing to advance against the euro this morning but has begun to pare its gains versus the dollar. Wage and price data will be in focus this week, as the latest labour market statistics are released on Wednesday, preceded by consumer price data on Tuesday. Real wages are expected to fall next year as weak pay rises are outstripped by a bump in inflation due to the weak pound, according to a survey released by the Chartered Institute of Personnel and Development released over the weekend, so this week’s figures will be another important early look at these dynamics.

EUR: The euro dropped sharply last week as investors dumped bonds globally, driving up interest rate differentials between the eurozone and the UK and US. Next month’s constitutional referendum in Italy also began to receive more nervous attention from investors, analysts and media as the next potential political flash point. Eurozone Industrial Production figures will be released today at 10:00 GMT, and European Central Bank President Mario Draghi will speak in Rome at 15:00. Tomorrow morning will see the release of German, Italian and European Gross Domestic Product figures, alongside the ZEW Economic Sentiment Survey and French inflation.

USD: Dollar strength remains a dominant theme for FX markets this morning, after President elect Trump appeared to begin the process of walking back some of his more outlandish and potentially damaging campaign promises. Furthermore, Trump has already begun the process of appointing political insiders to his cabinet, suggesting that his administration may not be as hostile to the existing political establishment as initially promised. Global market participants continue to price in increasing expectations of “Trumpflation”, or upwards price pressure triggered by an increase in the US budget deficit under President Trump, and this is giving USD a further boost as it increases the likelihood of interest rate hikes. This will be a busy week for the US data calendar, beginning tomorrow with Retail Sales data. Later in the week, Consumer Price Index statistics will be out on Thursday, and Federal Reserve Chair Janet Yellen will testify to lawmakers.

CAD: The loonie is fighting back this morning after selling off heavily in the wake of the US election and further indications of OPEC discord last week. Fiscal expansion under a Trump administration has the potential to boost demand for Canadian exports, but this prospect seems distant at the moment. On Wednesday Manufacturing Sales data will be released, followed on Friday by the Consumer Price Index.

 

UK news

REUTERS: May says to be ‘unashamedly pro-business’ as UK leaves EU. The British government will be “unashamedly pro-business” as it seeks to forge the country’s future role outside the European Union, but business must also act responsibly, Prime Minister Theresa May will say on Monday.
GUARDIAN: Most renters feel they’re unlikely to buy home in next five years – review. Almost two-thirds of renters in the UK believe they are unlikely to buy a home in the next five years, according to research for a Labour-backed inquiry into the housing crisis.
DAILY MAIL: Is YOUR hospital facing the axe? Secret plan to close maternity units and A&Es is revealed as NHS tackles budget crisis. The King’s Fund said NHS England was considering ‘contractions’ and closures across the country. The respected think-tank said even some of those drawing up the proposals feared they were a recipe for disaster.