Morning Report: 23 May 2017

23rd May 2017 By: Ranko Berich

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GBP. Sterling is trading down slightly this morning, as last night’s tragic suspected terror attack in Manchester has triggered a minor bout of risk aversion. General Election campaigning has been suspended, and the news cycle is likely to be dominated by coverage of the attack. Senior Bank of England decision makers are scheduled to testify to lawmakers from Parliament’s Treasury Committee today at 10:00 BST.

EUR. The euro saw yet another day of gains yesterday, this time triggered by the clearest yet statement from a major European leader against the ECB’s current, loose stance of monetary policy. Angela Merkel, speaking to a group of schoolchildren, said that Germany’s large current account surplus was due to the euro being “too weak” due to ECB policy. To her credit, Merkel did also add that bolstering domestic consumption was the best way to address imbalances with countries like France. The finer points of how credible or justified Merkel’s statements are is irrelevant – what matters is that this is another public statement of opposition to the ECB’s policies, and from Europe’s most powerful leader. Services and Manufacturing Purchasing Managers Indices were released this morning in the eurozone, with manufacturing output beating expectations and services missing expectations marginally.

USD. Yesterday saw more losses for the US dollar, and a flurry of mostly inconsequential speeches from Federal Reserve decision makers such as Harker and Kashkari. Kashkari will speak again this afternoon at 14:00 BST, followed by Manufacturing and Services Purchasing Managers’ Indices at 14:45, and the survey based Richmond Manufacturing Index, which will be released alongside New Home Sales at 15:00.

CAD. The loonie strengthened further yesterday as Canadians enjoyed Victoria Day. With tomorrow’s crucial OPEC meeting looming as a decisive event for crude oil markets, and therefore the loonie, today’s only release of note will be Wholesale Sales at 13:30 BST.

UK news

FT: Terror attack kills 22 in Manchester explosion. A man armed with an “improvised” bomb has killed at least 22 people and injured 59 outside a concert arena filled with teenagers in central Manchester on Monday night, in the worst terrorism incident in the UK since 2005. Police said the bomber, who died in the explosion, detonated the device shortly after the end of a concert by US pop star Ariana Grande around 10.30pm, adding the northern English city to the growing list of recent western targets that includes Paris, Stockholm, London and Berlin.

FT: EU ministers agree tough Brexit mandate. Germany warns reality yet to ‘break through’, as UK and bloc take opposing positions. Germany warned that the reality of Brexit had yet to “break through” in London on Tuesday as the EU unanimously agreed an uncompromising negotiating mandate for exit talks. EU ministers endorsed 18 pages of legally binding instructions for the bloc’s chief negotiator Michel Barnier, who is aiming to start formal talks in the week beginning June 19, almost exactly a year after Britain’s referendum vote to leave the union.