Morning Report: 26 June 2017

26th June 2017 By: Ranko Berich

 

GBP Sterling is trading slightly up this morning, after an uneventful week last week. The negotiations process for Brexit remains a slow-burn political drama, with headlines this morning focusing on Theresa May delivering more detail on her proposed solution for the rights of EU workers in the UK. Mortgage Approvals from the British Banking Association will be out today at 09:30 BST, and later in the week the latest Bank of England Financial Stability report will be released tomorrow, accompanied by a speech from Governor Mark Carney. On Friday Current Account data will be released alongside revised Gross Domestic Product growth.

EUR The euro enjoyed a slight bump on Friday against USD, and was stable overnight. Exit polls in Italy are currently showing the nation’s centre-right opposition, led by Silvio Berlusconi, will win contests for several municipal elections in northern Italy. The result may indicate growing troubles for Matteo Renzi’s government, which must hold elections no later than May next year. Today at 09:00 BST German IFO Business Climate survey data will be released, followed by a speech from the European Central Bank’s Mario Draghi at 18:30.

USD USD came under pressure last week and has not shown any appreciable rally this morning, as markets appear to have once again lost confidence in the potential for tighter monetary policy and higher inflation in the US over the medium term. Top tier data may challenge or confirm this assumption over the course of this week, with Durable Goods Orders scheduled for release today at 13:30 BST, and revised Gross Domestic Product Growth out on Thursday.

CAD The loonie had an eventful week last week, at first resisting weakness amid falling crude oil prices due to hawkish central banker comments and strong data releases. However, CAD did take a knock on Friday as weaker than expected Consumer Price Index data was released. On Wednesday of this week Bank of Canada Governor Stephen Poloz will speak, as will his BoC colleague Lynn Patterson. Monthly Gross Domestic Product Growth data will be released on Friday.

UK news

  • FT. Goodwill must prevail on EU citizens’ rights. The UK government has to prove to Brussels it will not discriminate. One year on since Britain voted to leave the EU and Theresa May has finally laid out proposals for dealing with the status of EU citizens in the UK after Brexit. Reassurances should have been given to the 3m Europeans residing in Britain long ago, to calm the fears of anxious families who worry they might be forced to leave the country or find themselves second class citizens. The prime minister’s initial offer, presented at a Brussels summit last week, struck a more constructive tone compared with some of her tougher rhetoric on immigration.
  • Reuters. Sterling weakness strengthens case for UK rate rise – BoE’s Forbes. Bank of England policymaker Kristin Forbes said on Thursday she feared the pound’s weakness would have a lasting upward effect on inflation, and that she was concerned central banks were becoming more reluctant to raise rates than in the past. Forbes’s three-year term on the BoE’s Monetary Policy Committee ends this month, and since March she has voted to raise British interest rates from their record-low 0.25 percent. “‘Lift-off’ of UK interest rates should not be delayed any longer,” she said in a speech to be given at the London Business School. “Sterling’s depreciation has fundamentally shifted underlying inflation dynamics in a way that makes it more pressing to begin this voyage soon.”