Morning Report: 4 September 2017

4th September 2017 By: Ranko Berich

GBP Sterling traded flat overnight, as investors and market participants digested the latest escalation of tensions on the Korean peninsula. Friday did see sterling strengthen against both EUR and USD, amid weak releases in the US and central bank intrigue in the eurozone. Britain’s own domestic woes pale in comparison somewhat, but over the weekend Theresa May’s Government reportedly suffered a strong backlash to their earlier instructions to MPS to not obstruct the passage of Brexit legislation via amendments. The European Union bill will have its second reading this Thursday. Today at 09:30 BST Construction Purchasing Managers Index data will be released.

EUR The euro saw further dramas on Friday, after a hawkish speech by Ewald Nowotny saw the single currency rise, before the waters were muddied by a Bloomberg scoop story citing unnamed European Central bank sources in stating that the ECB may delay its decision on quantitative easing until later in the year. The single currency strengthened sharply after Nowotny’s Comments, but then sold off on the anonymous story. This week’s ECB meeting on Thursday is therefore likely to impact the euro significantly, as the true direction the Bank is likely to take with regards to QE is deeply uncertain. This morning’s data has included a larger than expected increase in Spanish Unemployment, and at 09:30 BST Sentix Investor Confidence Data will be released, followed at 10:00 by the Producer Price Index.

USD Ongoing legislative challenges in the US over the debt ceiling and tax reform is likely to be put on hold this week as the Government confronts yet another drastic escalation in tensions with North Korea. Friday’s data seems to pale in comparison to the threat of an ICBM hitting Los Angeles, but Non-Farm Payrolls fell short of expectations to rise by 156,000 in August, while Average Earnings Growth once again slowed to just 0.1% on the month. Manufacturing Purchasing Managers Index data, in the meantime increased sharply, reflecting perhaps USD weakness supporting export orders. Today is Labour Day in the United States, and no data will be released.

CAD The loonie saw further, explosive strength on Friday after weak data in the United States combined with a week of strong Canadian releases to send the pair to its lowest closing level in two years. This week’s Bank of Canada meeting on Wednesday is therefore a high stakes even for the loonie, with many market participants now evidently expecting a rate hike, or at least a firm signal that one is on the way soon. Today is Labour Day in Canada.

UK news

  • GUARDIAN: McDonald’s workers to go on strike in Britain for first time. McDonald’s faces its first strike since it opened in the UK in 1974, as well as protests by unions and the public at several restaurants over pay and working conditions.
  • TELGRAPH: Jacob Rees-Mogg ‘lined up for ministerial job in preparation for higher office’. Eccentric Conservative MP Jacob Rees-Mogg is reportedly being lined up for a ministerial role in the next reshuffle as he is tested for higher office.
  • REUTERS: UK says defence commitment in Nordic and Baltic states won’t waver after Brexit. LONDON (Reuters) – Britain will pledge on Monday that its commitment to security and defence in Nordic and Baltic nations will not change after Brexit, seeking to reassure states affected by what foreign minister Boris Johnson described as “Russian antagonism”.