Morning Report: 31 August 2017

31st August 2017 By: Ranko Berich

GBP Sterling closed flat against USD, but did steadily appreciate against the euro yesterday. Money and Credit data from the Bank of England was released without incident, showing Mortgage Approvals creeping up slightly, while lending to private non-financial businesses put in a second strong month of expansion. Interesting news emerged from Theresa May’s trip to Japan, where the Prime Minister told reporters she intended to remain as Leader of the Conservative Party through the next election cycle. The announcement suggests May could perhaps feel more confident in the support of her party than has been speculated in the media recently.

EUR The euro came under broad sell pressure yesterday, but has opened today with a very firm rally ahead of the morning’s data. Spanish Consumer Price Index inflation fell slightly short of expectations, while Germany’s Consumer Price Index edged up 0.1% in August, as expected. The French Consumer Price Index, in the meantime, rose 0.5% in August, after a sharp 0.3% decline in July. This morning at 10:00 BST, eurozone CPI inflation will be released. The stakes for the euro are particularly high, given the single currency’s prodigious strength this year has been driven by expectations of policy tightening from the European Central Bank, which continues to be wary in the face of low inflation.

USD After a rough end to last week, this week’s nascent USD rally picked up further momentum yesterday and overnight. ADP’s estimate of Non-Farm Payrolls for August was 237,000, a decent print that suggests Friday’s official report is unlikely to be a disaster, even if it falls short of this level. Yesterday’s data also included an upwards revision for Gross Domestic Product growth in the second quarter, up to an annualised rate of 3.0%. The revision puts to bed concerns about the pace of GDP growth from earlier in the year, when many observers took note of the disparity between “hard” and “soft” data in the US economy. Today at 13:30 BST weekly Unemployment Claims will be accompanied by a potentially blockbuster release – the Core Personal Consumption Expenditures Price Index, the Federal Reserve’s preferred inflation measure. Personal Spending and Income data will also be released. Later in the afternoon, the Chicago Purchasing Managers’ Index will be released at 14:45, followed by Pending Home Sales.

CAD The loonie also fell back against USD yesterday, with USDCAD reaching a fresh high this morning. Canada’s Current Account deficit was smaller than expected in the first quarter, with foreign purchases of Canadian government bonds, due to higher yields from the Bank of Canada’s rate hike, the main contributor. Today at 13:30 BST the latest monthly Gross Domestic Product growth figures will be released, with most analysts expecting at best modest growth after the strong 0.6% expansion seen previously.

UK news

  • REUTERS: ‘I’m not a quitter’ says May, vowing to fight next election. KYOTO, Japan (Reuters) – Prime Minister Theresa May said she wanted to continue as Britain’s leader beyond the next parliamentary election, not due until 2022, dismissing expectations she could stand down after Brexit as early as 2019.
  • GUARDIAN: UK tells Brussels negotiators their Brexit bill sums do not add up. The UK has told EU negotiators their sums on the Brexit bill do not add up, as talks on Britain’s separation from the bloc hit deadlock. Tensions boiled over in Brussels as the EU accused Britain of failing to reveal its hand on the financial settlement. UK officials hit back at the EU, saying some claims for money had no legal basis.