Morning Report: 1 August 2017

1st August 2017 By: Ranko Berich

GBP Sterling and other major currencies appreciated sharply against USD at 4pm yesterday, in dramatic price action reportedly linked to end of month trading. Yesterday’s main release for the UK was the Bank of England’s Money and Credit report for June, which showed headline M4 money supply contracting by 0.2% month on month, while mortgage approvals remained steady and the various measures of household lending continued to show expansion in consumer debt. The amount borrowed by households through credit cards, loans and overdrafts reached £200bn for the first time since 2008. Today at 09:30 BST, the latest Manufacturing Purchasing Managers’ Index data will be released.

EUR The euro was another benefactor of USD weakness during trading around the 4pm London fix, and the single currency also had a few bursts of strength against sterling. Yesterday’s key data release was the flash estimate of eurozone Core Consumer Price Index in July, which beat estimates to rise 1.2% year on year, a slight acceleration from last month. Eurozone Unemployment also fell to 9.2%, the lowest level since February 2009. German Retail Sales expanded 1.1% in June, almost double May’s rate, while Italian Unemployment fell faster than expected, rounding off a morning of solid eurozone data. The Eurozone Manufacturing Purchasing Managers Index was released today at 56.6, broadly in line with expectations. Today at 10:00 BST the flash estimate of eurozone Gross Domestic Product growth will be released.

USD USD was sold heavily yesterday, as a sharp dip around 4pm end of month trading seemed to compound the overall bearish sentiment for the currency. While House Communications Director Anthony Scaramucci was sacked after a week in the role, in yet another dramatic personnel change from the Trump Administration. Yesterday’s data did little to help USD, despite Pending Home Sales jumping 1.5% in June. Today at 13:30 BST Personal Spending and Income data will be released alongside the Personal Consumption Expenditures Price Index, an important measure of inflation that is favoured by the Federal Reserve. Manufacturing Purchasing Managers Index data will be released by Markit and ISM at 14:45 and 15:00, and Total Vehicle Sales will also be released today.

CAD The loonie finally saw some profit taking yesterday, after several months of spectacular appreciation, and eased slightly against USD. Price Indices for Raw Materials and Industrial Products were released, both showing sharp monthly declines in June, mainly due to lower energy prices. Oil spot markets, however, were reasonably buoyant: crude oil opened above $50 in the United States for the first time since May. Today at 14:30 BST Manufacturing Purchasing Managers Index data will be released.

UK news

  • FT: Brexit set to raise UK banks’ costs 4% and capital needs 30%. Most detailed assessment yet comes amid risk of resources shift to US and Asia. Brexit will push up costs for banks by as much as 4 per cent and their capital requirements will rise up to 30 per cent, according to the most detailed assessment yet of what Britain’s departure from the EU means for the sector. The findings by consultants Oliver Wyman will make grim reading for its bank clients, many of which are struggling with low profitability. They come a day after HSBC became the first lender to put a price tag on Brexit, saying the immediate disruption would cost it $200m-$300m. Stuart Gulliver, chief executive of HSBC, said $1bn of revenue in its global banking and markets unit would be put “at risk” by Britain leaving the EU. But he said it planned to protect this revenue by moving up to 1,000 of its 6,000 UK investment banking jobs to France.
  • Reuters: Britain’s statistics watchdog puts stamp of approval on CPIH inflation gauge. Britain’s statistics watchdog on Monday put its stamp of approval on CPIH, the gauge of inflation preferred by official statisticians, following improvements to address quality concerns. The Office for National Statistics (ONS) first published CPIH, a measure that includes more housing costs, as an official statistic in 2013. But the body which supervises the ONS said in 2014 that it fell below acceptable quality standards, in part because of concerns about the way it measures owner-occupier housing costs, based on rental prices. On Monday, the UK Statistics Authority said it was now satisfied that the ONS had rectified this.