Morning Report: 24 January 2017

24th January 2017 By: Ranko Berich

GBP Sterling made good progress against USD and EUR on Monday, only pausing in the early hours of this morning, ahead of today’s widely anticipated Supreme Court ruling. The Court is expected to deliver its verdict on the Government’s appeal against its High Court loss on the issue on if Theresa May is able to use prerogative powers to activate article 50 of the Lisbon Treaty, and thereby begin the formal process of leaving the European Union. Sterling initially rallied when the Government lost its case at the High Court, so at first glance it seems plausible that a loss at the Supreme Court could have a similar effect, although much depends on the Government’s reaction to the verdict. The ruling is expected at 09:30 GMT.

EUR The euro is paring its gains versus USD from yesterday, ahead of a number of Purchasing Managers’ Index releases this morning. French Services and Manufacturing PMIs will be released at 08:00 GMT, followed by German and Eurozone equivalents at 08:30 and 09:00 respectively.

USD After coming under broad sell pressure yesterday the greenback found some modicum of stability overnight, and has managed to claw back some losses against GBP and EUR. How long the reprieve will last is unclear: the “Trump trade” for long USD and short fixed income positioning seems to be unravelling amid a complete lack of detail on fiscal policy from the new presidential administration. The administration has, however, begun to offer some policy detail on international relations, withdrawing from the Trans Pacific Partnership trade deal negotiations by executive order and speaking out against Chinese island building in the South China Sea. Today at 14:45 GMT the survey based Manufacturing Purchasing Managers’ Index will be released, followed at 15:00 by Existing Home Sales and the Richmond Manufacturing Index.

CAD Like much of the rest of the G10 CAD advanced against USD yesterday, paring those gains overnight. Monthly Canadian Wholesale Sales data showed a 0.2% month on month increase in November, following a 1.2% increase previously. In the meantime, data on North American oil rig counts showed a very strong increase, suggesting that the recent improvement in crude oil prices may be eliciting a strong local supply response.

UK News

  • Trump pulls US out of Pacific trade pact – FT. Decision comes after warning American business executives against moving production abroad. President Donald Trump signalled he will put trade protectionism at the heart of his economic policy, withdrawing the US from a historic Pacific trade pact and threatening to punish American companies for moving production overseas on his first working day in office. Mr Trump said pulling out of the 12-nation Trans-Pacific Partnership, a signature initiative of predecessor Barack Obama’s “pivot” to Asia, was a “great thing for the American worker”.
  • Bank of England to keep rates on hold until 2019 at least – Reuters. The Bank of England will leave its record-low interest rates and other stimulus measures unchanged at least until 2019, even though it is likely to revise up its 2017 growth predictions again next week, a Reuters poll found on Monday. All but one of the 67 economists polled by Reuters in the last few days said the Bank would keep its policy unchanged when it announces the outcome of the latest meeting of its rate-setters on Feb 2. After Britain voted last June to leave the European Union, the Bank cut borrowing costs to a record low of 0.25 percent and restarted its quantitative easing programme as it responded to initial signs that the economy was slowing sharply.