Morning Report: 29 August 2017

29th August 2017 By: Ranko Berich

GBP Sterling traded sideways against the euro yesterday, but firmed up slightly against USD, which had a rough start to the week. This morning’s data has included a surprise contraction for the Nationwide House Price Index, which fell 0.1% after last month’s 0.2% increase. This brought year on year house price growth down to 2.1%, down from 2.9% in July. Existing pressure on household finances got a mention as a possible driver of the fall in prices, as did wider economic conditions.

EUR The euro remains rampant this morning, reaching its highest level against the greenback since 2015, after extending Friday’s gains versus the US dollar yesterday. This morning’s data has included GfK Consumer Climate, which was marginally better than expected and showed a continuation of the upwards trend seen in the optimism of the consumers in the survey sample. Particularly noteworthy was the fact that expectations of future income hit another record high. French Consumer Spending expanded 0.7% after a drop of the same size last month, to leave Gross Domestic Product Growth unchanged at 0.5% month on month.

USD The dollar once again took a pummelling yesterday, with its misery continuing this morning against the euro, and slightly puzzlingly, the Yen, after a missile was launched by North Korea over Japan. Flooding in the aftermath of tropical storm Harvey is likely to continue to cause chaos, while distracting lawmakers from the looming debt ceiling debate, which as some stage will resurface as a risk for USD. Today at 14:00 BST the Case Shiller House Price Index will be released, followed at 15:00 by Consumer Confidence figures.

CAD After reaching new highs against USD yesterday the loonie took a brief pause and retreated slightly, only to begin to strengthen again overnight. Today at 13:30 BST price indices for Raw Materials and Industrial Products will be released.

UK news

  • FT: North Korea fires missile over Japan prompting alert Tokyo warns of ‘unprecedented’ threat after Hokkaido residents forced to take cover. North Korea has launched a ballistic missile that overflew Japan early Tuesday morning, escalating an already tense military stand-off in the region with an aggressive step it has not taken in almost 20 years. The Japanese government issued an alert for people in parts of Hokkaido, its second largest island, to take cover, putting residents on alarm and prompting an angry rebuke from the Japanese prime minister, Shinzo Abe. “A missile launch across Japan is an outrageous act that poses an unprecedented, grave and serious threat, and significantly undermines the peace and security of the region,” Mr Abe said. “The government has lodged a firm protest against North Korea.”
  • Reuters: Optimism wanes at UK services companies, labor shortages feared Optimism across Britain’s services sector fell during the three months to August, and companies felt the pinch from rising costs even though new business largely held up, an industry survey showed on Tuesday. The Confederation of British Industry’s quarterly report on the services sector, which produces the vast bulk of economic output in Britain, showed confidence waned in both consumer- and business-facing services firms. Official data last week showed Britain’s economy suffered weakness on all fronts in the three months to June, with shoppers pinched by the pound’s tumble, exports failing to fill the gap, and business investment frozen by Brexit uncertainty.
  • FT: EU demands that Britain ‘start negotiating seriously’ over Brexit Barnier and Davis exchange barbs at opening of third round of talks. Brussels called on the UK on Monday to “start negotiating seriously” on Brexit and unambiguously set out its positions on leaving the EU, as France and Germany held firm in supporting a divorce-first sequence for talks. Opening the third round of Brexit talks in Brussels on Monday, Michel Barnier, the EU’s chief negotiator, bluntly voiced concern that London was wasting time by refusing to engage on separation issues such as a financial settlement. His counterpart David Davis, the UK’s Brexit secretary, in turn rejected the suggestion that Britain was holding back as he called for more “flexibility” and “imagination” in the EU’s approach.