Morning Report: 20 December 2016

20th December 2016 By: Ranko Berich

GBP Sterling continued to suffer yesterday, as the Scottish National Party leader, Nicola Sturgeon, continues to highlight the importance of remaining in the European single market for Scotland- with the implication being that the SNP will use the Brexit plans as an excuse to force another referendum. Despite the continued political uncertainty, overall sterling is mostly higher this month versus the G10 currencies, with the exception of the US dollar, with the UK Government doing its best to indicate that the economy will be able to transition with a smooth Brexit. There was no economic data releases in the UK yesterday.

EUR The euro has dropped overnight against most of the G10 currencies as markets digest the effects of yesterday’s terror attacks in Germany, Turkey and Switzerland. Markus Pretzell, leader of the German right wing eurosceptic party “Alternative for Germany”, was particularly critical of Angela Merkel’s handling of the situation. Over the forthcoming year, political risk also remains incredibly high in the eurozone, with a number of general elections taking place next year in the region, amidst a surge in support for right wing populist and eurosceptic parties. Yesterday’s events will likely continue to increase the popularity of these parties, and thus increase the pressure on the single currency. Today’s data includes the German producer price index and the eurozone’s current account, though these will be overshadowed by yesterday’s events.

USD The dollar is higher after the Federal Reserve President, Janet Yellen, said economic gains are finally raising the living standards for most Americans as a healthy labour market contributes to higher wages. EURUSD is flirting with its previous lows as new dollar strength adds up to fresh euro weakness after yesterday’s terror events. No data will be released today in the US.

CAD The loonie has nearly erased all december’s gains against the USD as crude oil prices remain range bound and the greenback continues to move higher. It is a quiet day in the Canadian economic calendar, but the wholesale sales figure will be released at 13.30 CEST.

UK News

  • FT. Welcome sense from UK on the EU customs union. A step in the right direction but no help for crucial service exports. The UK government has said that, by March, it will invoke Article 50 and begin the process of leaving the EU. The possibility of a sudden, poorly planned and wrenching departure from the single market looms. Over the weekend, that prospect mercifully receded. Liam Fox, secretary of state for trade and an ardent Leaver, mooted the possibility that the UK might — for a while — remain within the EU’s customs union with its common external tariff on goods.
  • BBC. Joint call for EU citizens to stay in UK. Doubt about the status of European workers in the UK threatens the NHS, according to the TUC. Businesses and trade unions have called on Theresa May to guarantee immediately the right of EU citizens to stay in the UK after Brexit. The British Chambe