Morning Report: 8 February 2018

8th February 2018 By: Ranko Berich

GBP Sterling started yesterday off with a burst of strength, but then retreated back towards week lows against USD, while heading up versus the euro. It’s Super Thursday at the Bank of England today, meaning the latest Inflation Report will be released alongside a rate decision, policy statement, and meeting minutes, and presented by Monetary Policy Committee members including Mark Carney. No change is likely to monetary policy, and after several policy hints that turned out to be incorrect over the years, Carney is likely to be very subtle with any hints of a rate hike later this year, if any are even provided. The releases are scheduled for 12:00 GMT, followed by a press conference at 12:30.

USD The greenback had another good day yesterday against the euro and sterling, and strengthened sharply against the Chinese yuan overnight, in moves reminiscent of the 2015 Chinese equity rout and currency devaluation. The Senate reached a bipartisan budget deal to keep the government open, with a vote expected today and in the House. House minority leader Nancy Pelosi gave a marathon 8 hour speech yesterday and called on Speaker Paul Ryan to hold a debate on immigration reforms, suggesting that the vote today may end up being contentious even with the overwhelming majority commanded by Republicans. Federal Reserve Policy Makers Dudley and Williams both spoke yesterday, and seemed unfazed by this week’s equity drama. Today at 13:30 GMT weekly Unemployment Claims will be released.

EUR The single currency is getting a good reminder of how it is to be on the back foot as USD made inroads for the fourth consecutive day this week, while it’s performance against other currencies was far from stellar as well. News is emerging about the formation of a grand coalition in Germany, which markets appear to take as a done deal. The members of the coalition parties may still attempt to veto the coalition agreement, however. This morning the German Trade Balance showed a solid surplus of 21.4 billion in December.

CAD The loonie came under pressure by USD, which is slowly making a comeback this week, while its performance was more mixed against other G10 currencies. December Building permits yesterday showed some indication the Canadian housing market is alive and kicking as they expanded above expectations with 4.8%. The sharp growth comes after a contraction in November. Today at 17:45 GMT Bank of Canada Deputy Governor Carolyn Wilkins speaks in Quebec at a G7 symposium about innovation and global growth.

UK news

  • Reuters: George Soros donated money to campaign for a rerun of Britain’s EU referendum. George Soros, the billionaire who earned fame by betting against the British pound in 1992, contributed 400,000 pounds through his foundations to a campaign group which is seeking to halt Brexit, the group’s chairman said on Wednesday.
  • Reuters: Merkel loosens purse strings and embraces Europe to keep power. To secure a fourth term as chancellor, Angela Merkel is handing her Social Democrat (SPD) coalition partners control of the finance ministry, giving them licence to spend a record budget surplus, and embracing their demands for European reform.
  • Guardian: MPs and peers could be recalled or expelled for harassment. MPs and peers could face recall or expulsion under new sanctions aimed at combating widespread bullying and sexual harassment, which have been uncovered in a cross-party report.