Morning Report: 19 December 2016

19th December 2016 By: Ranko Berich

GBP Sterling saw its weeks-old run of strength against USD reverse convincingly last week, and the pound has failed to benefit off the back of the mild USD weakness seen overnight. No data will be released today, making for a potentially slow start to the week for sterling. Tomorrow at 11:00 GMT the Confederation of British Industry will release its Realised Sales index, and later in the week on Friday the final revision to Gross Domestic Product growth in the third quarter will be released.

EUR The euro slowly clawed its way back from Thursday’s multi-year lows against USD on Friday, and is also trading slightly up against the greenback this morning. This week’s price action may therefore prove decisive, as another test of last week’s lows will loom in the event of any serious USD strength. Friday’s biggest data release was eurozone Consumer Price Index inflation, which showed the Core CPI up 0.8% year on year, broadly comparable with the last quarter of 2013. This morning’s data has been more encouraging: the IFO German Business Climate Survey rose to its highest level since 2014 amid rising business confidence in the eurozone’s largest economy.

USD USD is mildly weaker this morning, after seeing broad strength in the wake of last week’s rate increase from the Federal Reserve. This week’s data calendar will start slowly for USD, with only Markit’s survey based Services Purchasing Managers Index due for release today at 14:45 GMT and no data scheduled tomorrow. Wednesday will offer some interesting releases in the form of Durable Goods Orders, the final revision of Gross Domestic Product Growth in the third quarter, and the PCE Price Index.

CAD The loonie stemmed its losses against USD on Friday, after an eventful week that first saw it continue to strengthen before reversing spectacularly after the Fed’s rate hike in the US. Crude oil prices will remain the focus for CAD trading, as the major benchmarks remain well above $50/barrel despite some losses last week. This week’s biggest releases will be the Consumer Price Index and Retail Sales, on Thursday.

UK news

  • Reuters. UK business confidence recovers in November. British businesses turned more optimistic in November about the country’s economy although they are still not as confident as they were before June’s Brexit vote, a survey showed on Friday. Business confidence hit its second-highest level since Britain voted to leave the European Union, polling firm YouGov and the Centre for Economic and Business Research (CEBR), a think tank, said.
  • FT. Fears EU Brexit delays will spur bank exodus to eurozone. EU Brexit negotiators are insisting Britain agrees to its European divorce settlement before Brussels offers any transitional deal, expecting international banks to get cold feet over losing “passporting” rights and start shifting operations from London to the eurozone. British chancellor Philip Hammond said this month that he wanted to discuss an interim deal “early on in the negotiations” to reassure the City of London that there would be no regulatory cliff-edge in March 2019, the date set for Britain’s exit from the union.