Morning Report: 20 February 2017

20th February 2017 By: Ranko Berich

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GBP. Sterling struggled on Friday, as markets digested the first indication of an economic slowdown due to Brexit. January’s Retail Sales report from the ONS showed headline retail sales had contracted 0.3%, after a 2.1% fall in December. The three months ended January were the first three month period that saw a decline in sales since December 2013. At least some of the blame can be attributed to higher prices at the shops, with sterling’s weakness over the past six months having now begun to feed through to store prices, reversing a long term downward trend. With the bulk of the inflation expected from sterling’s depreciation still yet to fully hit consumers, the question now is if further increases in prices will prompt a further slowdown in spending and a resulting general economic slowdown, given consumer spending has been the primary driver of growth in recent quarters. Today at 11:00 GMT the Confederation of British Industry will release its Industrial Order Expectations index, and later in the week the second estimate of Gross Domestic Product growth in Q4 2016 will be released on Wednesday.

EUR. The euro fought its way back from the very bottom of its recent trading range against USD last week, but took another turn for the worse on Friday as it became clear the eurozone would probably miss today’s soft deadline for a solution to the still ongoing Greek debt situation. European Finance Ministers will meet in Brussels today, but despite some reports of movement from the International Monetary Fund on key positions on Friday, the IMF said its position on insisting on debt sustainability measures for Greece had not changed. If a deal is not reached today, the crisis is likely to continue into this year’s busy European election season. This morning German Producer Prices were released at 0.7% month on month, another strong monthly increase. At 15:00 Consumer Confidence will be released.

USD. USD advanced on Friday, despite a lack of headline fundamental data releases. Today is Presidents’ day in the US, and no data will be released. The week’s biggest event for USD will be Wednesday’s release of the latest meeting minutes from the Federal Reserve, which will be examined closely for any clues about the likelihood of a rate hike at the Fed’s March meeting.

CAD. The loonie began to pare its gains versus USD last week, but has opened this week slightly up against the greenback. Today at 13:30 GMT Wholesale Sales data will be released, followed on Wednesday by Retail Sales and on Friday by the Consumer Price Index.

UK news

REUTERS: Asking prices for UK homes show smallest February rise since 2009. Asking prices for homes in England and Wales are rising more slowly due to rising consumer price inflation, worries about Brexit and tighter lending rules, property data firm Rightmove said on Monday, adding to signs of a slowing property market.

TELEGRAPH: Nearly every council in the country to hike council tax to fund social care. Nearly every council in the country is planning inflation-busting tax rises to fund social care but the extra money will be “swallowed up” by the cost of the Government’s National Living Wage.

DAILY MAIL: NHS cuts 15,000 beds in six years: One in ten have been axed – equivalent to closing 24 hospitals, report reveals. Hospitals have axed 15,000 beds in just six years, leaving wards at ‘breaking point’, a shock report reveals today. The dramatic reduction – equivalent to closing 24 hospitals – amounts to a 10 per cent fall in NHS beds at a time when the health service is under unprecedented pressure.