Morning Report: 21 February 2017

21st February 2017 By: Ranko Berich

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GBP.  Sterling drifted slightly higher yesterday, amid low FX volatility as the US and Canada enjoyed bank holidays. Debate on proposed legislation allowing Theresa May’s Government to begin the process of leaving the EU began in the House of Lords, with May herself attending some of the debate. The unelected Lords are unlikely to block the bill, but may force some significant amendments into it. The Confederation of British Industry released its Industrial Order Expectations index, which showed a slight improvement in February that was nonetheless enough to put total orders at a two year high. Today at 10:00 GMT Bank of England Governor Mark Carney will testify on monetary policy and inflation to Parliament’s Treasury Select Committee, and potentially face a grilling about the BoE’s initially gloomy forecasts for the economy after the EU referendum.

EUR.  The euro also had an uneventful day yesterday but came under sell pressure against the US dollar overnight. Greece and its creditors missed yesterday’s meeting of eurozone finance ministers as a deadline for a new debt agreement, meaning discussions will continue on an informal basis in the coming days, with the possibility of Greece being forced to leave the euro not completely ruled out. Fundamental data will be in focus this morning, with Markit’s Manufacturing and Services Purchasing Managers Indices due for release for France (08:00 GMT), Germany (08:30 GMT) and the eurozone as a whole at 09:00.

USD.  After a slow day yesterday USD is on the offensive again this morning, gaining versus sterling and the euro as well as JPY, AUD and NZD. The Federal Reserve’s Patrick Harker was on the news wires with comments reiterating earlier statements from fellow Fed policy makers that March should be considered for a rate hike, and making fairly bullish comments on the state of the economy. Today at 13:50 GMT Harker’s Fed colleague Kashkari will speak, and at 14:45 Markit’s Services Purchasing Managers Index will be released. Harker will follow up yesterday’s comments with a formal speech at 17:00.

CAD.  After lacklustre trading yesterday CAD is on the move again this morning, selling off to USD. Yesterday’s data included monthly Wholesale Sales, which rose an impressive 0.7% in December, marking a third consecutive monthly increase, with Machinery, Equipment and Supplies leading the increases.

UK news

Financial Times: Philip Hammond ‘listening’ to MPs’ concerns over business rates Chancellor under pressure to ease tax burden for businesses in spring Budget. The UK chancellor has promised Tory MPs he will listen to their concerns about businesses that are “hardest hit” by a business rates revaluation, as he faces a clamour of demands for more spending in next month’s Budget. Philip Hammond is under pressure from backbench MPs to use his Budget statement on March 8 to ease the transition to new business rates — which are based on rental values and due to be updated in April for the first time in seven years — while also finding money for social care and schools.

Reuters: UK factories pick up pace in February, but so do price pressures British manufacturers had their best month in two years in February but the post-Brexit vote fall in the value of the pound is making them push up their prices sharply, posing a challenge for 2017, an industry survey showed. The Confederation for British Industry’s monthly reading of the factory sector underscored how the decision to leave the European Union has so far failed to hurt the country’s economy, confounding the forecasts of a quick, sharp hit to output. The survey published on Monday added to other signs of a pickup in manufacturing on the back of Britain’s strong economic growth in 2016 when British car production hit a 17-year high.