Morning Report: 21 March 2017

21st March 2017 By: Ranko Berich

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GBP.  A spokeswoman for UK Prime Minister Theresa May yesterday announced that she would indeed follow through on her long-stated plan to trigger Article 50 on March 29th. Sterling showed little reaction, with the markets being somewhat reassured that despite the impending uncertainty of the exit negotiations, the UK government has at least been consistent in its plan of action to date. Today should see a pickup in volatility for sterling, with several inflation data series being published at 09.30 GMT by the Office of National Statistics, including Consumers, Producers, Retail sector and house price indices. Consumer inflation is expected to break above the central bank’s target of 2% today, which would fuel expectations of an interest rate hike later this year after a somewhat hawkish tone by the Bank of England last week. Bank of England’s Governor, Mark Carney, speaks at 10.35 GMT.

EUR.  The euro rallied overnight, reaching a 6-week high, following the first Presidential debate in France. Elabe Pollster, an independent poll provider, suggests that the inexperienced Macron was the most convincing of all the five candidates. According to Elabe, 29% of respondents indicated tha Macron led the debate, whilst far-left candidate Jean-Luc Melenchon came second with 20% of the votes. François Fillon, recently charged over a fake job scandal, and far-right Marine Le Pen both received 19%. The overall sentiment in the eurozone is improving now that politics related risks start to fade, and the euro approaches this year’s highs as a result. No euro data will be released today, expecting the euro to fluctuate on new headlines.

USD.  In contrast to the euro, the dollar hit a 6-week low this morning, after a short lived rally overnight. The first of this week’s Federal Reserve’s speakers, Charles Evans, reignited the dollar’s weakness after saying he would support one or two more hikes in 2017, countering aggressive bets expecting a further three or more hikes this year. Several Fed members are still due to speak this week, including the Fed’s Chair, Janet Yellen, who speaks on Thursday, and Neel Kashkari, who voted against an interest rate hike last week at the last Federal Reserve monetary policy meeting. Fed’s Dudley speaks at 10.35 GMT and US current account’s data will be released at 12.30.

CAD.  The loonie is slowly weakening since the beginning of the week despite of the best wholesale sales monthly release in 13 years. Wholesale sales jumped an incredible 3.3% in January, suggesting that consumer spending is improving in the country. However, crude oil prices remain under pressure after hedge funds positioning revealed a sharp contraction of long positions. Retail sales data will be published today at 12.30 GMT.

UK news

FT: UK retailers axe low-skilled workers as higher wage bills bite. Store chains cut 4,000 staff this year as companies invest in technology. Britain’s low-wage workers are due a pay rise next month but not all of them are celebrating. As the new minimum wage takes effect, the country’s biggest retailers are finding inventive ways of making do with fewer employees, in what economists call a sign of the potential pitfalls of the UK’s attempt — mirrored in many US cities — to favour the working poor. At least 3,700 shop workers have been made redundant from leading UK store chains this year, although some companies are adding jobs in frontline roles even as layers of management are peeled away. Publicly, at least, the retailers insist the cuts are geared towards serving customers better, rather than saving cash.