Morning Report: 13 November 2017

13th November 2017 By: Ranko Berich

GBP After a solid performance on Friday, sterling has gotten out of the wrong side of the bed this morning, erasing almost all of last week’s gains versus the US dollar. UK politics was once again thrown into upheaval as reports emerged yesterday that the amount of Conservative party MPs willing to sign a vote of no confidence in Theresa May’s leadership was approaching the critical threshold for a challenge to the Prime Minister’s position. Politics is therefore likely to dominate sterling this week as every scrap of information about the likelihood of May getting deposed is priced into financial markets. There are some top tier data releases on the calendar, including Price Indices on Tuesday and Labour Market data on Wednesday.

EUR After ending last week stronger amid a wave of risk aversion in global markets, the euro sold off slightly overnight. This morning’s data has included German Wholesale Prices, which changed 0.0% in October after a 0.6% spike last month. No further data will be released today, but the eurozone calendar livens up tomorrow with German Gross Domestic Product data out early in the morning, followed by eurozone GDP and the widely followed ZEW Economic Sentiment Survey later in the morning.

USD USD was well bid overnight, after coming under broad pressure in the second half of last week. Donald Trump’s visit to Asia continued with a surprise serenade from Rodrigo Duterte, who sung hit Filipino love song “You are the light” at a dinner in Manila. The Philippines President’s regime has been widely criticised by human rights groups for a ferocious campaign of extrajudicial killings against alleged drug dealers, something Trump has praised Duterte for doing an “unbelievable job” with, despite tensions in the two leaders’ public communication at other times. The tax reform debate will continue to rage in the United States this week, as the two houses of Congress attempt to reconcile and pass legislation, with possible consequences for USD. This will be a busy week for data, although no headline releases are scheduled for today. Producer Prices will be released tomorrow, followed by Consumer Prices on Wednesday alongside Retail Sales.

CAD The loonie had a relatively uneventful end to the week, trading sideways against USD after making some gains earlier in the week. Today is Remembrance Day in Canada, and no data will be released. Later in the week, the Consumer Price Index will be released on Friday.

UK news

  • FT: Pound drops after Theresa May no-confidence report. Sterling hit as Tory MPs said to plan challenge against UK prime minister. The pound fell fast on Monday following reports over the weekend that a group of Conservative members of parliament had agreed to sign a letter of no-confidence in Theresa May, UK prime minister.The moves wiped out more modest gains made by the pound on Friday, following a press conference from UK and EU Brexit negotiators. Monday’s heavy selling underscored sterling’s vulnerability to political factors such as the UK’s talks on the terms of its departure from the EU. A report in The Sunday Times said that 40 MPs had agreed to sign the letter of no-confidence amid concerns about Mrs May’s handling of Brexit.