Morning Report: 21 August 2017

21st August 2017 By: Ranko Berich

GBP Sterling closed lower against the euro and flat against USD on Friday, after having a bruising week despite several positive data releases. This morning the Rightmove House Price Index was released, and showed a 0.9% contraction in house prices in August, leaving year on year growth at 3.1%, 1.9% in London. This will be a somewhat quiet week for UK data, although revised Gross Domestic Product Growth data will be released on Thursday alongside indices for Services and Business Investment.

EUR Although EURUSD did close higher on Friday, on the whole the single currency did not regain any of the strong momentum seen against the greenback in July over the course of last week. No headline data will be released today, although the German Bundesbank’s Monthly Report, a roundup of statistical releases, articles and studies by the German Central Bank, will be released at 11:00 BST. Later in the week, The ZEW Economic Sentiment Survey will be released on Tuesday, followed by Services and Manufacturing Purchasing Managers Indices on Wednesday. European Central Bank President Mario Draghi is due to speak at the US Federal Reserve’s Jackson Hole Symposium on Friday, but ECB sources have already explicitly warned no new policy announcement will be made then.

USD USD continued to struggle against many G10 and emerging market currencies on Friday, but on the whole did show a little more resilience last week than the week before. The weekend’s political news included the fact that controversial Chief Strategist Steve Bannon would be leaving the White House. Bannon’s departure is potentially (but not certainly) a sign that the economic centrists in the administration, such as Economic Advisor Gary Cohn, may be increasing in influence and a more conventional administration may be in the making. No US data will be released today, with the week’s first major releases coming tomorrow in the form of the House Price Index and the Richmond Manufacturing Index. The Federal Reserve’s annual Symposium at Jackson Hole will commence on Thursday, and although Mario Draghi is not likely to make any earth shattering pronouncements on behalf of the European Central Bank, intense attention will be paid to Fed Chair Janet Yellen’s address on Friday at 17:00 BST.

CAD The loonie began to regain momentum against USD last week, after a period of retrenchment in the first half of the month. Monthly inflation data released on Friday supported the hawkish outlook of the Bank of Canada’s latest Monetary Policy Report, as the headline Consumer Price Index beat expectations to remain flat month on month. Today at 13:30 BST Wholesale Sales data will be released, followed by Retail Sales on Tuesday.

UK news

  • FT: Trump targets tax reform to reconnect with Republicans. The Trump administration has decided to push hard for tax reform and dial down a controversial national security investigation into steel imports in a bid to swing Republican support behind the president after the turmoil of recent weeks, according to senior officials. They said that former marine general John Kelly, the new chief of staff, was leading efforts to restore order to the White House and reassure Republican leaders alarmed by Mr Trump’s equivocal reaction to white nationalist-fuelled violence in Virginia last week and the subsequent open criticism from business leaders. Past efforts to bring order to the Trump administration and its policymaking have struggled largely because of the president’s propensity to derail plans with a single riff on Twitter. But senior people within the White House insisted that the exit last week of Steve Bannon, Mr Trump’s chief strategist and architect of his nationalist economic stance, cleared the way for a more streamlined policy process.
  • Reuters: Financial squeeze on UK households eases from three-year peak. The squeeze on British households’ financial situation eased this month as slowing inflation and greater job security improved conditions from a three-year low recorded in July, a consumer survey showed on Monday. IHS Markit said its monthly Household Finance Index rose to 43.5 from a three-year low of 41.6 seen in July. Both figures are well above the survey’s average reading of 40.4 since it began during the depths of the financial crisis in 2009, but are below the 50 mark that would indicate households felt richer. “UK households continued to face a sharp budget squeeze in August, driven by sustained inflation and weak pay growth,” said IHS Markit economist Sam Teague, adding that unsecured borrowing was rising as households tried to bridge a budget gap.