Morning Report: 16 January 2018

16th January 2018 By: Ranko Berich

GBP Sterling seems to be taking something of a breather this morning and is trading slightly down against USD and EUR, having reached fresh post-referendum highs against the US dollar yesterday. News reports emerged that Norway was seeking to ensure Britain’s demands for a “bespoke” trade agreement did not force the country to withdraw and renegotiate its own agreements. Drafts of the negotiating guidelines for chief EU negotiator Michel Barnier were also leaked, which appeared to be much stricter than had been anticipated. This morning will see the release of Consumer Price data at 09:30 GMT, with the headline Consumer Price Index expected to see inflation slow to 3.0% from 3.1%.

EUR The euro faces a fresh bout of political uncertainty this morning, and briefly dropped almost half a percentage point against USD as news emerged that Angela Merkel’s prospective coalition partners, the SPD, were facing internal party opposition to the blueprint coalition agreement that was reached over the weekend. Further developments in the story will be highly relevant for the euro today.

USD The greenback is finally showing some signs of a rally against the yen, and had a brief burst of strength against the euro as well, having taken yet another pummeling yesterday. Today at 13:30 GMT the Empire State Manufacturing Index, a survey based measure, will be released, while lawmakers are reported to be considering a stopgap measure to raise the self-imposed US debt ceiling this week.

CAD The loonie strengthened further against USD yesterday, but has traded broadly flat overnight. Market participants may be hesitant to trade the loonie to further large swings today, ahead of tomorrow’s Bank of Canada rate announcement. News website Axios reported that President Trump is developing a softer attitude to NAFTA, consistent with the President’s backdown on previous threats against China and Mexico, both crucial US trade partners.

UK news

  • Reuters: EU “still open” to Britain changing mind on Brexit. Donald Tusk, the European Council president, weighed in to new British debate on whether to hold a second referendum on Brexit by saying on Tuesday that Britons would be welcome to stay in the European Union.
  • Telegraph: Carillion collapse: will pensions still be paid?  Debt laden construction firm Carillion has fallen into liquidation after it failed to reach an agreement with creditors during crisis talks over the weekend.