Morning Report: 9 August 2017

9th August 2017 By: Ranko Berich

GBP Safe haven assets were well bid overnight and sterling sold off, as the latest tensions between North Korea and the United States provided the wrong kind of impetus for market movement. No top shelf UK data was released yesterday, but the additional sterling weakness seen in the wake of the turbulent political developments was sufficient to send sterling to fresh lows against USD and the euro, although the moves have since reversed this morning. No headline sterling data will be released.

EUR The euro fell sharply against USD yesterday, echoing the price action seen in the wake of US Friday’s Non-Farm Payrolls report and further suggesting that EURUSD buyers may finally be seeing their conviction fade slightly and a reversal or period of retrenchment may be ahead for the pair. Euro data yesterday included better than expected prints for German and French trade balance. Today at 09:00 Italian Industrial Production figures will be released.

USD USD strengthened broadly yesterday, as more firm labour market data was released and sabre rattling continued between nuclear states North Korea and the USA. After Friday’s strong Non-Farm Payrolls report, yesterday’s move on USD was triggered by another item of labour market data, the Job Openings and Labour Turnover Summary, which showed job openings at a series high, firm evidence for a tightening labour market. However, given the Federal Reserve’s caution in judging the inflationary potential of the economy, the tight labour market is likely to need to translate into higher wages and higher inflation before steeper monetary tightening becomes a prospect. Today at 13:30 BST Non-Farm Productivity and Unit Labour Costs will be released, followed at 15:00 by Wholesale Inventories.

CAD USDCAD traded flat yesterday, as did crude oil prices, although it is interesting to note USD did make significant inroads elsewhere. Today at 13:15 BST Housing Starts will be released, followed at 13:30 by Building Permits and 15:30 by Crude Oil Inventories.

UK news

  • FT: North Korea threat after Trump vows ‘fire and fury’ Kim Jong Un said to be considering strike on Guam. North Korea said its leader Kim Jong Un was weighing whether to strike the US Pacific territory of Guam, just hours after Donald Trump vowed to meet threats made by North Korea “with fire and fury like the world has never seen”. The comments, released via North Korea’s state news agency, appear to escalate a dangerous game of chicken as the US struggles to bring the nuclear aspirant and its rapidly developing missile programme into line. The Korean People’s Army said the strike plan would be “put into practice in a multi-current and consecutive way any moment” once the supreme leader had made a decision about targeting the small island territory of fewer than 200,000 people, which lies south of Japan.
  • Reuters: Bank of England says Brexit transition desirable for UK, EU banks The Bank of England said a transition period after the Britain leaves the European Union would give banks more time to make orderly changes as Brexit poses risks to financial stability. With UK due to leave the bloc in March 2019, the BoE’s Prudential Regulation Authority (PRA) said it faces heavy demands from Brexit fallout on banks and insurers. BoE Deputy Governor and PRA Chief Executive Sam Woods said “some form of implementation period is desirable” between Britain leaving the bloc and start of new trading terms to “give UK and EU firms” more time to make necessary changes.