Morning Report: 16 May 2017

16th May 2017 By: Ranko Berich

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GBP. Weakness against the euro and USD is the theme of sterling trading this morning. Just released inflation data shows consumer prices beating expectations and, once again, putting the Bank of England in a difficult situation. Inflation has ramped up to a 4-year high and is now sniffing the BoE’s 3.0% forecasted peak over the next 2 years. If inflation continues the current trend and breaks above 3% over the next few months, the Bank of England could be forced to reassess its current stance and begin to tighten monetary policy, despite low wage growth. Sterling nonetheless has weakened on the back of the release as the BoE would continue to look through higher inflation, leaving the UK economy in a considerably weak spot.

EUR. The euro is on a tear this week, advancing further against USD this morning in the wake of a continuing unwind of political risk in the eurozone. This morning’s headline eurozone data will be a key test for the euro’s strong upwards trend, with the latest Gross Domestic Product figures and the widely followed ZEW Economic Sentiment Survey set to be released at 10:00 BST. Growth is expected to be strong at around 0.5% quarter on quarter, and sentiment has been improving steadily in recent editions of the ZEW survey, especially for the crucial German economy, meaning expectations are high for this morning’s releases.

USD. USD. USD is once again under pressure this morning, amid further political turmoil as reports emerged for Donald Trump sharing sensitive intelligence with Russian ambassador Sergei Lavrov. Yesterday’s sole data release for USD was negative, with the Empire State Manufacturing Index falling to -1.0, reflecting falling reported output. Today will see a raft of data releases, beginning with Building Permits and Housing Starts at 13:30 BST. Industrial Production and Capacity Utilization will be released at 14:15, followed by Mortgage Delinquencies at 15:00.

CAD. Crude oil prices reached another fresh high yesterday on headlines that Saudi Arabia and Russia supported an extension of OPEC production cuts, further supporting the loonie. No Canadian data will be released today.

UK news

FT: Trump faces outcry over Isis intelligence handling. Republicans join criticism over report president shared plot details with Russians. Donald Trump faced a bipartisan outcry on Monday after reports that the US president had endangered national security by sharing highly classified information in an Oval Office meeting with Russia’s top diplomat. Mr Trump revealed details of an Isis plot, breaching the trust of an unnamed ally that gathered the information, in a meeting last week with Sergei Lavrov, Russia’s foreign minister, and Sergei Kislyak, Moscow’s ambassador, the Washington Post reported. The details Mr Trump revealed — including the plot’s intention to use laptops to attack aeroplanes and the city in which it had been uncovered — were so sensitive they had been withheld from some US allies and tightly restricted within the US government, the Post reported.