Morning Report: 23 January 2018

23rd January 2018 By: Ranko Berich

GBP Sterling surged yesterday, reaching a fresh post-referendum high against the US dollar, and put in an equally solid performance against the euro. Philip Hammond was quoted as saying the UK will be seeking to discuss future trading relationships with the EU and other partners at this week’s World Economic Forum in Davos. For now, market participants seem to be giving little weight to repeated assertions from European leaders that sectoral deals, such as for the finance industry, will not be able to replicate the benefits of full single market access. Government borrowing figures will be released today at 09:30 GMT, followed at 11:00 by Industrial Order Expectations from the CBI.

USD The dollar has taken only a modicum comfort from the passage of stopgap legislation to end the current government shutdown, possibly due to the fact that yesterday’s deal was little more than a delay of the immigration fight. Amid the drama of yesterday’s senate developments, the administration also approved tariffs on imports of solar cells and washing machines, which may prove relevant if it turns out to be a portent of future protectionism, particularly with this week’s NAFTA negotiations looming. The Richmond Manufacturing Index will be released today.

EUR EURUSD has seen some intra-day volatility, but no significant moves over the last 24 hours, while the euro has weakened to sterling. This morning’s data will include the ZEW Economic Sentiment index at 10:00 GMT, a survey of institutional investors and analysts. The German index is widely followed, and has recently reflected raised expectations of growth in the eurozone’s largest economy.

CAD Yesterday the loonie strengthened slightly against most of its G10 colleagues, most notably against the US dollar. Yesterday’s data was far from convincing, however. November Wholesale Sales came out slightly lower than expected at 0.7% month on month growth, while the global number of delayed oil projects is decreasing again, according to a report from consultants Rystad Energy. This may indicate increased oil supply in the future, suppressing oil prices, which could drag on the loonie. Today the sixth round of NAFTA negotiations start in Montreal, which is likely to dominate loonie headlines for the coming week.

UK news

  • New York Times: Stopgap Bill to End Government Shutdown Passes Congress The House passed a short-term spending bill to reopen the government.
  • Bloomberg: How Irish Border Issue Threatens to Erupt Back Into Brexit Talks While the agreement was designed to prevent a breakdown in talks, serious questions still need to be resolved, according to three people familiar with the EU side of the negotiations. Different interpretations around the precise meaning of May’s commitments are starting to crystallize, according to one European diplomat, and flash points could become clear when the legal text that underpins last month’s accord is drafted early this year.
  • Politico: Why the shutdown battle is only on pause Congress has until Feb. 8 to strike another deal or the government closes again. And the parties remain far apart on spending and immigration.