Morning Report: 19 February 2018

19th February 2018 By: Ranko Berich

GBP Sterling had an eventful Friday, weakening off the back of weak Retail Sales, but finding a modicum of stability later on comments from lead European Union negotiator Michel Barnier expressing optimism about the likelihood of an “orderly” Brexit. Retail sales fell well short of expectations in January, disappointing hopes for a rebound after a dismal December and presenting a risk to growth in the first quarter. Ample UK data will be released this week, with the calendar beginning with a speech by Mark Carney at 18:45 GMT today. TomorrowCBI Industrial Order Expectations will be released, followed by labour market data and inflation report hearings on Wednesday.

EUR The single currency had an off day last Friday, weakening against the entire G10 amidst a rally in the global bond market. Aside from an unwind of the bond selloff seen earlier in the month, observable causes for this euro weakness were hard to find. Politics in Europe remain in flux, with Emmanuel Macron’s approval rating dropping to the lowest point since he got elected, and the Italian elections heading for a messy climax as opinion polls point to no clear winning coalition. The economic calendar for the Eurozone is busy this week, with Consumer Confidence on Tuesday, Purchasing Manager Indices on Wednesday, European Central Bank Meeting Accounts on Thursday and final Consumer Price figures finishing off the week on Friday.

USD Dollar weakness remained the dominant theme of FX markets last week, despite a number of ostensibly positive US releases. Friday’s data included higher than expected prints for Building Permits, Housing Starts, and Import Prices, as well as the University of Michigan’s Consumer Sentiment survey, giving the greenback a minor boost. Today is a public holiday in the US due to Presidents’ Day, and no major data will be released until Manufacturing and Services Purchasing Managers Indices on Wednesday.

CAD The loonie strengthened in the morning against USD on Friday, only to gradually sell off later and close on a loss. December Manufacturing Sales and Foreign Security purchases both disappointed and the slight uptick in oil prices proved insufficient to turnaround the downwards direction that loonie had taken earlier. This week we have the Wholesale sales on Wednesday and Retail figures on Friday.

UK news

  • Reuters: Gearing up for rate hike, UK households turn gloomier on finances – survey LONDON (Reuters) – British households’ gloom about their finances deepened this month, and most now expect borrowing costs to rise again within six months after the Bank of England raised interest rates in November, a survey showed on Monday.
  • Financial Times: China threatens to retaliate against US metals tariffs. China has threatened retaliation after the Trump administration received a green light to impose steep tariffs on aluminium and steel imports on national security grounds, in the latest escalation of trade tension between the world’s top two economies.
  • Australian Financial Review: Donald Trump lashes out over Russia probe in angry tweetstorm.  President Donald Trump lashed out with fresh anger about the intensifying Russia probe over the weekend, accusing Democrats of enabling a foreign adversary to interfere in the 2016 election and attacking the FBI as well as his own national security adviser.