Morning Report: 26 January 2018

26th January 2018 By: Ranko Berich

GBP After running rampant over the last two weeks sterling appears to be taking its foot off the pedal a bit this morning. Chancellor of the Exchequer Philip Hammond remarked he hoped the UK and European Union economies would only move “very modestly apart” after Brexit, only to be slapped down by Prime Minister Theresa May later. Today at 9:30 GMT Preliminary Q4 Gross Domestic Product figures are announced, telling us more about how the UK economy is weathering uncertainty surrounding Brexit and the financial health of its households.

EUR The single currency reached the highest point since December 2014 yesterday, only to drop off significantly in the overnight market and to regain the offensive this morning. Despite mentioning how the recent euro strength was “worth monitoring” in his press conference yesterday, European Central Bank President Mario Draghi did not mention any specific levels at which the ECB would intervene, which markets took as a message the risk to inflation was insufficient for the ECB to change its policies, triggering the initial euro strength. Draghi did criticize comments from US Treasury Secretary Steven Mnuchin that a weaker US dollar was “good” for US Trade, referring to an agreement between the major economies to not verbally intervene in currency markets. Apart from M3 Money supply at 9:00 GMT the Eurozone data calendar is empty, which gives markets time to digest yesterday’s ECB press conference.

USD Statements from policymakers have driven USD this week, but after USD reached multi year lows on a variety of crosses, it took comments from US President Donald Trump himself to stem the losses and prompt a rally. Speaking in an interview to CNBC, Trump downplayed Treasury Secretary Mnuchin’s remarks that appeared to praise a weaker dollar and said they had been misinterpreted, causing USD to rally, although the euphoria has proven short lived and the greenback is again under pressure this morning. After this week’s messaging crossfire, Trump himself will address Davos at 2pm GMT, in what has the potential to be a historic moment in the style of Chinese premier Xi Jingping’s address in 2017.

CAD The loonie lost substantial ground yesterday against USD, only to pare virtually all losses this morning, while it is up slightly against other currencies. Canadian Core Retail Sales were once again a fine display of the expansive phase in which the Canadian economy is at the moment as they easily beat expectations with a month-on-month growth of 1.6% in December. Today we have another cracker on the calendar with the Consumer Price Index at 13:30 GMT.

UK news

  • Telegraph: Donald Trump backs down on Britain First: US president says he is ready to apologise over far-right videos. Donald Trump has performed a climbdown in a row with Theresa May over his sharing of inflammatory videos by the far-right Britain First group
  • Guardian: UK GDP grows faster than expected at 0.5%. The British economy grew at a faster rate than expected in the three months to the end of December. GDP grew by 0.5% in the fourth quarter of 2017 following expansion of 0.4% in the three months to September, according to the Office for National Statistics. City economists had forecast growth of 0.4%.