Morning Report: 1 December 2017

1st December 2017 By: Ranko Berich

GBP Sterling had another good day yesterday, extending earlier gains which were driven by overnight political news later in the afternoon and evening. The only major data release was the Nationwide House Price Index, which rose 0.1% in November. No new material news was added to the week’s political developments, which have given sterling a boost on the increasing chances of a breakthrough in Brexit negotiations over the coming weeks. This morning at 09:30 GMT, Markit’s Manufacturing Purchasing Managers’ Index will be released.

EUR The euro saw further losses to sterling yesterday, but after a brief spot of weakness in the morning, the dollar came under severe pressure in the afternoon and EURUSD quickly headed back up towards levels last seen on Monday. Yesterday’s key data release was European Consumer Price Index inflation, which rose to 1.5% year on year in November, slightly less than expected. The core index, which does not include fuel, was up only 0.9% year on year, broadly unchanged over the last couple of years. Eurozone Unemployment, however, fell further to 8.8%, compared to 10% as recently as Q4 last year.

USD After a relatively uneventful start to the day, USD came under heavy sell pressure in the afternoon, possibly related to end of month portfolio rebalancing trades from large institutional investors. The afternoon’s data was reasonably encouraging, if anything: Personal Spending and Income data for October beat expectations, while the Personal Consumption Expenditures Price Index rose 0.2% on the month. The Chicago Purchasing Managers’ Index dropped slightly from the 6 year high seen last month, while still reflecting rapid activity growth among the surveyed businesses. Today at 14:30 the Federal Reserve’s Robert Kaplan will speak, followed at 14:45 GMT and 15:00 by Manufacturing survey indices from Markit and ISM. Kaplan’s Fed colleague Harker will speak at 15:15.

CAD The loonie weakened yesterday amid data releases, moving fixed income markets, and OPEC news, but rallied overnight, leaving USDCAD trading broadly unchanged from yesterday morning. The loonie initially weakened, as Canada’s Current Account widened to $19.3b in the third quarter, with the goods deficit widening by $3.6b. News emerged that OPEC and Russia had agreed to extend their current production restrictions through 2018 in order to shore up prices, as expected. Inventory levels emerged as a key metric that the cartel was looking at in order to judge if the market was sufficiently balanced for supply increases. Today at 1.30pm GMT monthly Employment data will be released, alongside Gross Domestic Product.

UK news

  • Telegraph: Donald Trump’s ‘working visit’ to UK dropped as tensions with Theresa May grow over president’s far-Right retweets. US diplomats have dropped plans for Donald Trump to conduct a visit to Britain in January amid a war of words between the two countries’ leaders.
  • Guardian: Fortnum & Mason struggling to recruit staff after Brexit vote. The boss of Fortnum & Mason says the world famous London store is struggling to recruit staff after the Brexit vote with the situation most acute in its restaurants.