Morning Report: 13 Septemer 2017

13th September 2017 By: Ranko Berich

GBP Sterling rocketed to fresh highs for the year against USD yesterday, after August inflation data showed price growth accelerating across all of the major indices released by the Office for National Statistics. The headline Consumer Price Index rose from 2.6% year on year to 2.9%, near the top of the Bank of England’s central forecast band for the year. The extent of the surprise relative to expectations meant that the releases had a large impact on sterling – for example the Core Consumer Price Index rocketed to a six year high, and was above all 28 economist forecasts submitted to Bloomberg. Sterling may have reacted favourably to yesterday’s releases, but the week is far from over: today at 09:30 BSTLabour Market data, including crucial Average Weekly Earnings statistics, will be released. The increase in inflation over the past year has meant the real value of wages is falling. If earnings show signs of an increase in today’s figures it will be a sign that the economy as a whole is generating upwards cost pressures aside from the inflationary shock of the EU referendum and last year’s sterling weakness.

EUR The euro was out of the spotlight yesterday, and ceded ground to sterling while seeing some intraday volatility against USD. After several days of slow data flow, the eurozone economic calendar picks up somewhat today. German Consumer and Wholesale prices have already been released this morning, with the former rising 0.1% as expected in August, while the latter rose significantly faster than expected. Quarterly eurozone employment data was also released this morning, and showed an increase of , underlining the continued improvement in labour markets on the continent. At 10:00 BST, eurozone Industrial Production data will be released.

USD After a promising start to the week USD traded flat against the G10 currencies as a whole yesterday. Income data released by the Census Bureau for 2016 showed that real median household incomes had risen healthily over the year by 3.2%, while the number of households in poverty fell by 2.5 million, underlining the overall benefits of the steady labour market improvement seen in the United States over recent years. Yesterday’s data included a firm print for the NFIB Small Business Index, and yet another month of high numbers of job openings in the economy. Today at 13:30 BST, monthly Producer Price Index data will be released.

CAD The loonie reversed its gains from Monday yesterday, after reaching a high for the week against USD earlier in the trading session. No headline Canadian data was released, but Finance Minister Bill Morneau gave an interview to reporters stating that Canada’s Debt to GDP ratio would fall faster than previously expected, driven by strong economic growth. The drought of Canadian data will continue today, but at 15:30 BST Crude Oil Inventory data from the US Energy Information Administration will be released.

UK news

  • Reuters: UK inflation jump puts Bank of England back in spotlight on rates British inflation hit its joint highest level in more than five years in August, complicating the Bank of England’s job this week of explaining why it is not raising interest rates. The fall in the value of the pound since last year’s vote to leave the European Union helped drive the biggest rise in clothing prices since the consumer price index was launched in 1997 and rising global oil costs also had an impact. Consumer prices overall increased by 2.9 percent compared with a year earlier, the Office for National Statistics said, up from 2.6 percent in July and above the median forecast in a Reuters poll of economists for a rise of 2.8 percent.
  • FT: State of the Union: Juncker urges new impetus for EU reforms Brussels is urging EU leaders to seize a 12- to 18-month “window of opportunity” to drive forward major reforms, signalling a federalist policy push after this month’s German elections. Speaking to the European Parliament in Strasbourg in his annual State of the Union address, Jean-Claude Juncker, the president of the European Commission, identified trade policy, security, and migration among a list of priorities ahead of the 2019 European elections. Expanding the borderless Schengen area and the list of countries using the common euro currency were also on his list of priorities. Brexit, he said, is “a tragic moment”, but “not the be all and end all.”