Morning Report: 27 June 2017

27th June 2017 By: Ranko Berich

GBP Aside from one minor wobble in the middle of the session, sterling was again quite stable against USD and EUR yesterday. Politically, the major headline stemmed from news that the Conservative Party finally managed to strike a deal with the Democratic Unionist Party, which enables the Conservative’s to stay in power as a minority government. The price negotiated for the support of the DUP’s ten elected parliament ministers for Prime Minister Theresa May’s continued premiership will be one billion pounds of extra funding for the province. The deal is somewhat controversial, with British newspapers highlighting that the sum is equivalent to the annual salary of around 12,000 NHS doctors, or sprinklers for 600 tower blocks. Today at 09:30 BST, the Bank of England’s latest Financial Stability Report will be released, followed by a Press Conference given by Mark Carney at 11:00.

EUR The euro saw some short lived strength against USD yesterday, but is currently trading within spitting distance of yesterday’s open after paring its gains. Controversy has continued in the wake of a deal by the Italian Government to bail out and liquidate two particularly troubled banks. The two banks balance sheets only represent some 2% of the Italian banking system, and the bailout will shield senior bond holders from losses- raising criticism of state-funded socialism for the rich, at a time when the Italian economy is still feeling the effects of the austerity following the last eurozone crisis. Yesterday’s data releases included the German IFO Business Climate, which hit a record high as the 7000 German businesses surveyed reported soaring economic activity and a strong outlook for the future. IFO’s President went as far as the call the survey “jubilant”. Today at 09:00 European Central Bank President Mario Draghi will speak in Portugal.

USD The greenback continues its struggle against commodity currencies, with AUD, NZD and CAD all having risen at least 4% since the start of May. This has been particularly interesting given that the value of commodities themselves- most notably gold and oil- actually being under sell pressure over the past month. Elsewhere, however, there has been little significant movement, although there was a jitter of weakness in the wake of Durable Goods Orders, which fell well short of expectation and contracted on a month on month basis. USDJPY also hit a five week high on extremely bullish global risk appetite. Today at 14:00 BST the Case Shiller House Price Index will be released, followed at 15:00 by CB Consumer Confidence and the Richmond Manufacturing Index. Three Federal Reserve decision makers will speak this afternoon, with Harker speaking at 16:15, followed by Chair Yellen at 18:00 and Kashkari at 22:30.

CAD The loonie strengthened further yesterday, as crude oil prices held above $43/barrel and anticipation built for what forecasters expect will be a decline in stockpiles this week. No headline Canadian data will be released today, so the focus will remain firmly on developments in oil prices.

UK news

  • FT: Business groups say UK’s plans for EU nationals lack clarity. Employers say proposals would lead to a new administrative burden. Business groups responded on Monday with frustration to the government’s proposals on EU citizens’ rights post-Brexit, which they said lacked the clarity employers needed and would lead to a big increase in the administrative burden on companies and individuals. “The announcement — which ranges from [the] government ‘wanting to’ to ‘intending to’ — will do nothing to ease the uncertainty of EU nationals and their employers,” said Tim Thomas, director of employment and skills at the EEF, which represents manufacturers.