Morning Report: 8 August 2017

8th August 2017 By: Ranko Berich

GBP Sterling recovered its lost ground from yesterday morning’s move against the US dollar yesterday, though continues to struggle against a euro, touching a fresh 10 month low yesterday. The UK economy had some encouraging news, as Halifax’s House Price Index rose 0.4% in July, which was welcomed by markets after the sharp fall in June that had taken year on year price growth down to 2.1%. Nonetheless, Halifax Managing Director Russell Galley said stamp duty and the Brexit spending power squeeze had contributed to weak demand in the sector. The British Retail Sales Consortium’s Retail Sales Monitor was released overnight, and showed year on year sales growth slowing to 0.9%. Elsewhere, the Recruitment and Employment Confederation reported that employers were facing a shortage of staff as the availability of workers fell sharply in July.

EUR The euro once again made fresh highs against sterling yesterday, and after trading mostly flat against USD yesterday appears to have regained a modicum of momentum overnight. German Industrial Output fell sharply in June, registering its biggest drop of the year after several months of expansion had led analysts to believe the sector would instead grow by 3.7%. Sentix Investor Confidence, a widely followed sentiment survey of investors and analysts, showed a marginal fall in reporter confidence in yesterday’s release. This morning’s data has included Trade Balances for Germany and France, with Germany’s surplus larger than expected and France’s deficit smaller than expected.

USD USD has shown some signs of resistance to resuming its downwards path this week, but weakened overnight against the euro. Minneapolis Federal Reserve President Neel Kashkari made comments on Twitter that suggested Friday’s labour market report did not necessarily mean the Federal Reserve was more confident about the inflation outlook, describing the report as “more of the same”. Elsewhere Kashkari’s Fed colleague James Bullard, who is not voting on monetary policy this year, said that he believed interest rates should remain unchanged in the immediate future. The two bankers’ dovish statements are consistent with market pricing of short term interest rate futures, which does not reflect significant chances of a hike in the near term. Today at 11:00 BST the NFIB Small Business Index will be released, followed at 15:00 by the Job Openings and Labour Turnover Summary.

CAD The loonie resumed its downwards trend yesterday, weakening throughout the morning and seeing an additional spike of weakness against USD in the afternoon. Today at 13:15 BST Housing Starts will be released.

UK news

  • Reuters: UK recruiters blame Brexit as staff shortage worsens – REC A shortage of staff for British employers worsened in July, hurt by the departure of European Union workers after last year’s Brexit vote, a group representing recruitment agencies said on Tuesday. The Recruitment and Employment Confederation (REC) said the availability of staff overall suffered its biggest fall last month in a year and a half. “The parts of the economy most reliant on European workers are under even more pressure as many EU workers return home,” REC Chief Executive Kevin Green said. “Employers are not just struggling to hire the brightest and best, but also people to fill roles such as chefs, drivers and warehouse workers.” London in particular was feeling the strain, with hiring growing at a slower pace than anywhere else in Britain.
  • BBC: Wage squeeze to get tighter The big squeeze on incomes will get tighter from here and will last longer than previously thought. At the moment, prices are rising 2.6% while wages are rising just 2%. That gap is expected to widen later this year. Inflation is expected to peak at around 3% in October, as the surge in import prices caused by the post-Brexit referendum drop in the pound continues to feed through to shop prices.