Morning Report: 18 September 2017

18th September 2017 By: Ranko Berich

GBP Sterling had a decisive week last week, breaking clearly above its post EU referendum trading range against the US dollar, and also rallying against the euro. Faster than expected inflation and a series of hawkish signals from the Bank of England were the drivers for the move, and so today’s speech by Mark Carney at the International Monetary Fund in Washington at 16:00 BST stands out as another potentially significant event for sterling. Carney is giving a lecture specifically on Central Banking, so it’s unlikely the BoE Governor will be able to avoid some discussion of the Bank’s aggressive intervention last week, which appeared to be a concerted effort to signal near term rate hikes. Monthly Retail Sales data will be released on Wednesday, and represents another important checkpoint for the current sterling rally.

EUR Last week began with the euro falling back slightly to the US dollar, but the single currency went on the offensive again and closed higher against the greenback on Thursday and Friday, to leave EURUSD trading only slightly down on the week. This morning’s data will include final Consumer Price Index inflation figures from the eurozone at 10:00 BST, although no revision to earlier estimates of 1.5% annual inflation is expected. Later in the week, the ZEW Economic Sentiment survey will be released on Tuesday, and European Central Bank President Mario Draghi will speak on Thursday and Friday.

USD Despite performing well against the Yen, USD weakened to the G10 currencies on a weighted basis on Friday, most notably against sterling and the euro. Friday’s data included a soft print for Retail Sales, which contracted 0.2% in August, causing the S&P 500 to rise above 2500 for the first time, highlighting the distortions that central bank easings have created in global markets, where bad economic news translates to good news for asset prices. This week’s biggest event for USD will be the Federal Open Market Committee’s rate announcement on Wednesday night at 19:00 BST, which will be accompanies by updated forecasts of key economic variables. The FOMC is also expected to announce how and when it will begin to unwind its balance sheet, which remains near record levels due to its historic quantitative easing programme.

CAD Last week saw the loonie slightly pare back its spectacular gains from the last couple of weeks, amid a lack of headline data releases. This week’s calendar is livelier, beginning with Foreign Securities Purchases today at 13:30 BST, followed by a speech from Bank of Canada Deputy Governor Tim Lane at 19:00 BST. Later in the week, Manufacturing and Wholesale sales will be released on Tuesday and Friday respectively, followed, also on Friday, by Consumer Price Index data.

UK news

  • Reuters: Britain proposes new security treaty with EU after Brexit. LONDON (Reuters) – Britain will propose on Monday signing a new security treaty with the European Union after Brexit to maintain and intensify cooperation to thwart “ever-growing and increasingly cross-border threats”.
  • Guardian: Boris Johnson left isolated as row grows over £350m post-Brexit claim. Boris Johnson faced growing pressure over his intervention on Brexit as Cabinet colleagues lined up to question his actions and he was accused of a “clear misuse of official statistics”