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News in Brief - 12/01/2018

GBP

Monex  
 

Sterling took yet another pounding from the euro yesterday, but was able to regain some of its recent losses against the dollar. News flow was sparse, although the Bank of England’s Credit Conditions Survey was released without incident, as lenders continued to tighten unsecured loans. No major sterling data will be released today.

EUR

Yesterday’s meeting minutes from the European Central bank set off a fresh round of euro strength, as they hinted at a potential revision in forward guidance. If such a change was made official over the coming months, it would be the first major departure from the current promise to maintain accommodative policy, which has been in place since the implementation of forward guidance in 2013. The ECB is not about to turn hawkish overnight, but a move from unconditional assurance that policy will remain loose to a more data dependent approach would nonetheless be a significant milestone on the path to normalisation.

USD

The dollar is headed for its fifth weekly loss this morning, after yesterday’s Producer Price Index release put an end to any hopes of a rally. The headline as well as the core index came in at +0.1% in December while forecasters had envisioned prices would increase 0.2%. The main reason for the soft print mentioned in the report were prices for final demand services that were lower than expected. The underlying trend still points to the upside however and certain subcomponents of the report, most notably apparel, point to upward risks for the December Consumer Price Index. December CPI will be published today at 13:30 GMT, accompanied by Retail Sales.

 
 
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UK News - 12/01/2018

Guardian: Donald Trump calls off visit to London amid fears of mass protests Donald Trump has cancelled a visit to Britain next month to open the new US embassy in London amid fears of mass protests. The American president claimed on Twitter that his reason for calling off the trip was his displeasure at Barack Obama having sold the current embassy for “peanuts” and built a replacement for $1.2bn. “Bad deal,” he wrote.

Reuters: Merkel’s conservatives, SPD agree German coalition blueprint – sources BERLIN (Reuters) – German Chancellor Angela Merkel’s conservatives and the Social Democrats (SPD) agreed after all-night talks on Friday to a blueprint for formal coalition negotiations, party sources said, bolstering prospects for an end to months of political uncertainty. The agreement between party and parliamentary leaders should pave the way for detailed negotiations in coming weeks, lifting the uncertainty that has undermined Germany’s role in international affairs and raised questions about how long Merkel will stay in her job.

Reuters: May tells bankers they are a priority for Brexit amid job warnings LONDON (Reuters) – British Prime Minister Theresa May told bankers from firms such as Goldman Sachs on Thursday they were a priority for her in the Brexit talks, just as new warnings emerged of job losses in the London financial sector unless there is a trade deal.

News in Brief - 11/01/2018

GBP

Sterling weakened further while rumours dominated major FX markets yesterday, as USD and the loonie moved on unsourced reports and anonymous sources. Chancellor Philip Hammond went on a charm offensive in Berlin, telling a business audience that “it takes two to tango”, and appealing for help in creating a “bespoke” trade agreement for Britain that included concessions for the UK financial sector. As if to underline the importance of the issue, recruiters Morgan McKinley said that job vacancies in London’s finance industry fell 52% in December. The Financial Times reported that German officials were less than impressed with the overture. Yesterday’s data included solid Manufacturing Output, and a narrowing in the trade deficit in the three months to November, although Construction Output fell well short of expectations.

EUR

The euro took part in the yesterday’s amusing game of “chase the dollar headline”, at first advancing before retreating, and strengthened further against GBP. The single currency was mostly out of the spotlight yesterday, with a slow data calendar. Today at 10:00 GMT Industrial Production figures will be released, followed at 12:30 GMT by the latest meeting minutes from the European Central Bank.

USD

Shock headlines dominated yesterday’s trading for USD, when in the late morning various news source began reporting that Chinese officials were looking at reducing use of US treasuries as a future staple of their foreign reserves. USD sold off along with US treasuries, with various benchmark bonds such as the 10 year approaching yield highs for the year or longer. Bond yields move inversely to prices. The move unwound throughout the day, helped along by official Chinese sources from the State Administration of Foreign Exchange issuing a statement saying that earlier stories may have been “fake news”. Producer Prices will be released alongside weekly Unemployment Claims today at 13:30 GMT.

UK News - 11/01/2018

Telegraph: Jeremy Hunt urged to boost NHS budget as flu crisis marks ‘watershed moment’ for health service. The NHS is at a “watershed moment” and needs tens of billions in extra cash to deliver the required levels of care, hospital bosses have warned.

Guardian: Brexit: UK could lose half a million jobs with no deal, says Sadiq Khan. A no-deal Brexit could cause the UK to lose half a million jobs and nearly £50bn in investment by 2030, according to an economic forecast commissioned by the mayor of London, Sadiq Khan. The report, which models five possible scenarios for leaving the EU ranging from a near-status quo situation to leaving on World Trade Organisation terms without any transition agreement, warns that the worst option could be a “lost decade” of economic slump.

Reuters: UK lenders plan to tighten grip on consumer loans – BoE. British lenders are planning to further tighten their grip on consumer lending which has already been slowing in recent months, a Bank of England survey showed on Thursday.

News in Brief - 10/01/2018

GBP

Sterling remained on the back foot yesterday, amid slow news flow. Philip Hammond and David Davis appeared as authors of an article in German Newspaper Frankfurter Allgemeine, appealing for a high level of access to EU markets for the finance sector, based on mutually recognised regulatory regimes. Lead Brexit negotiator Michel Barnier warned last month that “There is no place [for financial services]. There is not a single trade agreement that is open to financial services. It doesn’t exist”. Today at 09:30 GMTIndustrial Production and Construction Output figures will be released alongside the Goods Trade Balance.

EUR

The euro weakened further to USD yesterday, but traded flat against sterling. The official eurozone Unemployment rate was 8,7% in December, the lowest since 2009, although disparities remain large between nations.This morning’s sole major release was French Industrial Production, which contracted 0.5% in November, after a 1.7% spike in October.

USD

The DXY dollar index rose for the third day in a row, gaining against sterling and euro and paring back the losses it made in the last weeks of 2017. The December NIFB Small Business Economic trends print was 104,9, retracing slightly from the 34 year high of the November reading. Today we have the first of this week’s US inflation trio with the Import Prices at 13:30 GMT followed at 15:30 by the Crude Oil Inventories.

UK News - 10/01/2018

Reuters: UK economy set for ‘underwhelming’ 2018, says British Chambers of Commerce. Britain’s economy looks set for an underwhelming 2018, according to a major survey on Wednesday that showed businesses are in a subdued mood ahead of Brexit.

Telegraph: German hostility risks derailing UK plans for bespoke Brexit trade deal. Britain’s plan for a bespoke Brexit trade deal is at risk of being derailed by German opposition even before negotiations on the EU-UK future relationship begin later this year, the Telegraph can reveal.

News in Brief - 09/01/2018

GBP

Sterling largely shrugged off yesterday’s political drama in the UK . It seems a bit early in the year to start burning through the political hot take cliches, but Theresa May’s cabinet reshuffle descended into farce yesterday as various cabinet jobs were rebranded or subject to typos in official communication, ministers refused to move, or outright resigned. Overnight the British Retail Consortium released its Retail Sales Monitor, which tracks official Retail Sales fairly well. The index suggested retail sales growth had cooled slightly in the final three months of the year, with non-food sales falling an average of 1.4% compared to a year earlier.

EUR

The euro was in full retreat yesterday, falling steadily against USD after last week’s buoyant price action on EURUSD. Better than expected Sentix Investor Confidence and surprisingly good Retail Sales figures did nothing to support the single currency. This morning’s data has included strong German Factory Orders, which rebounded 3.4% after several months of declines. The eurozone Unemployment Rate will be released at 10:00 GMT.

USD

The dollar continued to appreciate against a broad swathe of major currencies yesterday, but took a knock against the Japanese yen overnight. Atalanta Federal Reserve president Raphael Bostic gave a fairly generic assessment of his view on rate hikes this year, saying a slow removal of accommodation was appropriate, but that three or four hikes a year may be too fast. The NFIB Small Business Index will be released today at 11:00 GMT, followed at 15:00 by the Job Openings and Labour Turnover Summary, a leading indicator of labour market tightness.

UK News - 09/01/2018

Telegraph: Night of the blunt stiletto. Jeremy Hunt refuses job as business secretary as Justine Greening quits over Cabinet reshuffle Theresa May’s hopes of asserting her authority with a Cabinet revamp fell flat after senior ministers derailed her reshuffle by refusing to budge from their jobs.

Guardian: Toby Young resigns from the Office for Students after backlash. Toby Young has stepped down from the Office for Students less than 24 hours after the universities minister issued a robust defence of his position in the Commons, amid a huge backlash over the free schools champion’s appointment.

News in Brief - 08/01/2018

GBP

Sterling is down this morning as Prime Minister Theresa May is about to embark on a cabinet reshuffle. May has been perceived by many observers of the Conservative Party as lacking the internal support for such a move since last year’s disastrous general election, but this morning’s news reports indicate she is likely to avoid demoting or moving senior figures and potential rivals such as Boris Johnson and Amber Rudd. It’s worth noting implied volatility from three month sterling options fell to its lowest level since December 2014 last week, showing a lack of concern from market participants about future instability. This morning’s main release will be the Halifax House Price Index at 08:30 GMT.

EUR

The euro had a volatile session on Friday, ultimately closing lower against USD despite some sharp swings. Crucial coalition talks between potential partners and Angela Merkel’s CDU begin in earnest this week, following more than three months of indecision after Germany’s indecisive general election. A collapse in this final round of talks would be a substantial disruption for the euro, given Germany’s importance to the regional economy. This morning’s data has included a 0.4% contraction in German Factory Orders, which fell 0.4% in November after rising 0.5% previously. At 09:30 Sentix Investor Confidence will be released, followed at 10:00 by Retail Sales.

USD

After taking a pummeling last week the dollar is trading up this morning. San Francisco Fed President John Williams said in a Reuters interview conducted on Saturday that three rate hikes made sense to him this year, giving the dollar some support after a bruising week. Friday’s Non-Farm Payrolls report showed only 148,000 jobs being added in December, but November’s figures were revised upwards sharply and Average Earnings rose 0.3% as expected, so overall the report was fairly good. Raphael Bostic, who was appointed head of the Atlanta Fed last year and is a voting member of the rate setting Federal Open Markets Committee, will speak today at 17:40 GMT, followed by another appearance from Williams at 18:35.

UK News - 08/01/2018

Reuters: May to change government ministers soon, senior figures reported to be safe. British Prime Minister Theresa May said on Sunday she would announce changes to her ministerial team soon, with media reports saying her foreign, finance, interior and Brexit ministers would keep their jobs in a reshuffle starting on Monday.

Guardian: UK factories optimistic for 2018 despite Brexit concerns, survey finds. Britain’s manufacturers are more upbeat about the state of the global economy than at any time since 2014 and believe demand from overseas will sustain their businesses through another year of Brexit uncertainty, a survey has shown.

News in Brief - 05/01/2018

GBP

The British pound had a quiet day yesterday in which gains were made on cable and other G10 currencies, but losses were endured against euro. December Car Sales showed their biggest drop since 2009, a sign that consumers are postponing big ticket purchases. The December Services Purchasing Manager Index had a healthy reading of 54.2, though the details were mixed. The new order growth slowed down to a 16-month low, while the business activity in the sector saw a sharp rise in December. Sterling is heading for an early weekend, as today’s data calendar remains empty.

EUR

Euro surged yesterday, but halted its advance as sudden as it came, only to pace nervously just below the three year highs on EURUSD which were put on the boards last September. The December Service PMIs were marginally above expectations at 56.6 and contained a handful of records on various subparts of the report. It indicated that risks for inflation in the Eurozone appear to be tilted to the upside for the coming months. November German Retail Sales this morning were beyond solid and jumped up 2.3% month-on-month, making us forget the drop of 0.9% that came out of the blue last October. Today at 10:00 GMT we may see some first glimpses of strengthening inflation as the Eurozone Consumer Price Index Flash Estimate is published.

USD

The greenback was facing headwinds across the board yesterday and had to give up some ground to sterling and euro, although it is back on the offensive again this morning. The weakness of the dollar was inconsistent with the data that came out, which was actually quite good. The ADP estimate of Non-Farm Payroll growth was well above expectations at +250K and the Final Services PMI showed a score of 53.7, again better than expected. Elsewhere, North Korea accepted South Korea’s invitation for diplomatic talks next week for the first time in two years, which should help ease tensions in the region. Today at 13:30 GMT the Non-Farm Employment Changes are published together with Unemployment figures and Average Hourly Earnings, followed at 15:00 by the ISM Non-Manufacturing PMI.

News in Brief - 04/01/2018

GBP

Sterling reached a fresh high for the year against the US dollar in the morning, but saw it’s fortunes reverse as the greenback rallied in the afternoon. Yesterday’s main release was the Construction Purchasing Managers’ Index, which fell short of expectations and showed falling commercial activity offset by decent residential building. Today at 09:30 GMT the equivalent Services PMI will be released, representing the largest sector of the UK economy.

EUR

The single currency retraced a bit yesterday after it hit the highest point since September on EURUSD earlier in the week. Positive news from the German political arena arrived as the three main political parties currently negotiating to form a coalition government- the CDU, CSU and SPD- produced a joint statement stating that “trust has grown, we’re starting negotiations optimistically” and spelling out that “conditions for tight and effective exploratory talks” to be held at the 7th of January are present. Throughout the morning several national readings of Services PMIs will be released, culminating into a figure for the entire Eurozone at 9:00 GMT.

USD

The US dollar found a modicum of solace yesterday and made inroads against a number of the G10 currencies, among others the euro and sterling, after a weak start to the year. The ISM Manufacturing Purchasing Managers Index was more than solid with a reading of 59.7 and held the promise of more good times to come with the leading component new orders being standing out in a positive fashion. In the evening the latest Meeting Minutes of the Federal Open Market Committee showed the Federal Reserve is unconcerned about the flattening yield curve, and does stand ready to tighten faster if inflation suddenly strengthens. Today at 13:15 GMT the ADP estimate of Non-Farm Payroll growth in December is expected to make it to our displays, followed at 13:30 by weekly Unemployment Claims.

UK News - 04/01/2018

Reuters: Tony Blair warns British voters – time is running out to stop Brexit folly. Former British Prime Minister Tony Blair on Thursday warned voters that time was running out to reverse Brexit, a folly he said would torpedo Britain’s remaining clout and be regretted for generations to come.

Guardian: Fears minimum wage rises will put more jobs at risk of automation. Above-inflation increases in Britain’s minimum wage are putting a growing number of workers at risk of being replaced by machines, one of the country’s leading thinktanks has warned.

Daily Mail: Hundreds of thousands of commuters face train chaos next week in three days of strikes just days after massive fare hikes were announced. Hundreds of thousands of commuters are facing travel chaos in three days of rail strikes next week – just days after fare hikes were announced. But talks have been held in a bid to avert some of the strikes planned on the railways next week.

News in Brief - 03/01/2018

GBP

Sterling posted its highest level against the US dollar since September, and showed most other major currencies its heels yesterday as well. The strength came despite Manufacturing Purchasing Manager Index data disappointing with a score of 56.3, versus 58.0 expected, but this was not enough to restrain the British pound. Today the PMI of the construction sector is expected at 9:30 GMT.

EUR

Euro continued the strength we saw at year end, reaching the highest point on the EURUSD cross since September last year, and gaining against the rest of its G10 peers as well. Manufacturing data from the Eurozone yesterday was strong, and news out of the high towers of the European Central Bank added to the bullish sentiment that buzzed around the single currency yesterday, with ECB Governing Council member Benoit Coeure suggesting that the Asset Purchasing Program may not be extended again. Today we have the German Unemployment change at 8:55 GMT.

USD

The greenback had a bad start of the year and slumped 0.4% against all the other G10 currencies, though this morning a jump in treasury yields seems to have put it on a more solid footing. Markets were unmoved by chatter from President Trump, who engaged in a classic “who’s got the biggest” contest by tweeting that his nuclear button is both “bigger” and “works”, in response to reports that the North Korean leader Kim Jong Un said that he has a nuclear button on his desk. Today at 15:00 GMT we have the ISM Manufacturing PMI and at 19:00 the Federal Open Market Comittee meeting Minutes are released.

UK News - 03/01/2018

Reuters: UK building firms see growth slow in December – PMI. Growth in Britain’s construction sector slowed last month for the first time since September, as weaker growth in house-building combined with a fall in commercial building and stagnating infrastructure work, a survey showed on Wednesday.

Telegraph: Nicola Sturgeon urged to drop tax hike after 15 per cent rise for Scots’ energy and insurance bills. Nicola Sturgeon has been urged to drop plans for an income tax hike in April after it emerged Scottish households were hit with a 15 per cent increase in their energy and insurance bills last year.

News in Brief - 02/01/2018

GBP

Sterling has come off reasonably well from the volatility seen overnight, benefitting against the US dollar and seeing only small losses since midnight against the euro. The year’s first significant data release will be today’s Manufacturing Purchasing Managers’ Index, at 09:30 GMT. The release will be accompanied by mortgage Equity Withdrawal figures from the Bank of England. Later this week equivalent PMIs for the Construction and Services sectors will be released on Wednesday and Thursday respectively.

EUR

The euro has had a cracking start to 2018, advancing to its highest level against USD since September 2017. There’s been little in the way of data or headlines to drive the move, but European sovereign yields have increased sharply in recent weeks, reflecting increasing expectations of growth, inflation, and policy normalisation. As with sterling, Manufacturing Purchasing Managers’ Indices were released this morning for eurozone economies.

USD

USD is in a tailspin this morning, following a bruising series of losses last week that has seen the weighted greenback index DXY fall some 1.5% since Christmas. Today’s data will include the Manufacturing Purchasing Managers Index from Markit, at 14:45 GMT. Later in the week, the Non-Farm Payrolls report will be out on Friday.

UK News - 02/01/2018

Reuters: Britain wants financial services included in EU trade deal – Davis. LONDON (Reuters) – Britain wants to include financial services in a trade deal with the European Union which covers a full sweep of economic areas, Brexit minister David Davis said on Tuesday.

Guardian: Rail bosses seek to defend UK train fare rises amid protests at stations. Rail bosses have defended the biggest annual increase in train fares in five years in the face of dozens of demonstrations against the rise by commuter groups and unions at the UK’s busiest stations.

News in Brief - 22/12/2017

GBP

Sterling weakened yesterday and overnight, as scandal claimed a senior ally of Prime Minister Theresa May and weak Consumer Confidence figures were released overnight. In testimony to Parliament’s Treasury Select Committee, Bank of England Governor Mark Carney made overtures to the European financial sector, saying that it would be allowed to continue to operate on a similar basis to current “EU Passport” rights after Brexit, despite the prospect of the EU tightening regulation of UK banks operating on the continent. Overnight the GfK Consumer Confidence Index dropped slightly to -13, compared to -7 in January of this year. Government borrowing figures will be released this morning at 09:30 GMT.

EUR

The euro saw a burst of strength yesterday afternoon, breaking higher against the US dollar, and has managed to hold on to a decent chunk of its gains overnight. Bundesbank Head and European Central Bank policy maker Jens Weidmann was true to form in a speech yesterday and called for an end date for the ECB’s bond buying programme, saying that wage growth would add to upwards price pressure in the future. Today at 15:00 GMT eurozone Consumer Confidence figures will be released.

USD

USD performance was a mixed bag yesterday, with the greenback weakening against the euro but managing to hold its own elsewhere. Tax reform legislation cleared the final legislative hurdles with a final vote in the House of Representatives, meaning that the bill will become law once signed by President Trump, who said in a statement that he “promised the American people a big, beautiful tax cut for Christmas…With final passage of this legislation, that is exactly what they are getting.”

UK News - 22/12/2017

Reuters: May forces her deputy to resign over pornography scandal. LONDON (Reuters) – Prime Minister Theresa May forced her most senior minister, Damian Green, to resign after an internal investigation found he had made misleading comments about pornography on computers in his parliamentary office.

Guardian: Bank of England to allow EU banks to keep UK operations unchanged after Brexit. The Bank of England plans to allow European banks to maintain their UK operations under current rules following Brexit, in a direct challenge to European Union regulators to adopt the same policy towards UK-based banks.

Telegraph: Four in five GPs ordering needless drugs and tests for fear of being sued, amid soaring small claims by patients. Four in five GPs say they are ordering needless tests and drugs for patients for fear of otherwise being sued. It comes amid soaring numbers of successful small claims against the NHS, which have risen by more than a quarter in one year.

News in Brief - 21/12/2017

GBP

Sterling weakened yesterday and overnight, as scandal claimed a senior ally of Prime Minister Theresa May and weak Consumer Confidence figures were released overnight. In testimony to Parliament’s Treasury Select Committee, Bank of England Governor Mark Carney made overtures to the European financial sector, saying that it would be allowed to continue to operate on a similar basis to current “EU Passport” rights after Brexit, despite the prospect of the EU tightening regulation of UK banks operating on the continent. Overnight the GfK Consumer Confidence Index dropped slightly to -13, compared to -7 in January of this year. Government borrowing figures will be released this morning at 09:30 GMT.

EUR

The euro saw a burst of strength yesterday afternoon, breaking higher against the US dollar, and has managed to hold on to a decent chunk of its gains overnight. Bundesbank Head and European Central Bank policy maker Jens Weidmann was true to form in a speech yesterday and called for an end date for the ECB’s bond buying programme, saying that wage growth would add to upwards price pressure in the future. Today at 15:00 GMT eurozone Consumer Confidence figures will be released.

USD

USD performance was a mixed bag yesterday, with the greenback weakening against the euro but managing to hold its own elsewhere. Tax reform legislation cleared the final legislative hurdles with a final vote in the House of Representatives, meaning that the bill will become law once signed by President Trump, who said in a statement that he “promised the American people a big, beautiful tax cut for Christmas…With final passage of this legislation, that is exactly what they are getting.”

UK News - 21/12/2017

Reuters: May forces her deputy to resign over pornography scandal. LONDON (Reuters) – Prime Minister Theresa May forced her most senior minister, Damian Green, to resign after an internal investigation found he had made misleading comments about pornography on computers in his parliamentary office.

Guardian: Bank of England to allow EU banks to keep UK operations unchanged after Brexit. The Bank of England plans to allow European banks to maintain their UK operations under current rules following Brexit, in a direct challenge to European Union regulators to adopt the same policy towards UK-based banks.

Telegraph: Four in five GPs ordering needless drugs and tests for fear of being sued, amid soaring small claims by patients. Four in five GPs say they are ordering needless tests and drugs for patients for fear of otherwise being sued. It comes amid soaring numbers of successful small claims against the NHS, which have risen by more than a quarter in one year.

News in Brief - 20/12/2017

GBP

Sterling closed flat against USD, and weakened slightly to the euro, which put in a strong performance yesterday. Data flow was practically nonexistent, and the day’s political headlines had little impact. The data calendar begins to pick up again today, with the release of the Confederation of British Industry’s Realised Sales index at 11:00 BST. Bank of England Governor Mark Carney will testify to lawmakers on the Financial Policy Committee’s latest Financial Stability report at 13:15 BST.

EUR

The euro saw broad strength yesterday, despite a lack of headlines or significant data. The only release of note, the German IFO Business Climate survey, actually fell slightly short of expectations, with the surveyed institutional investors and analysts reporting a marginally lower level of optimism. This morning’s data has included a soft print for the German Producer Price Index, which rose 0.1% in November, and at 09:00 GMT the eurozone Current Account will be released. German Bundesbank head and chief European Central Bank hawk Jens Weidmann will speak at 13:00 GMT.

USD

The rapid progress made towards passing tax reform legislation has been scant comfort to the US dollar over the last 24 hours, and the greenback has come under pressure. The House and Senate passed the latest bill yesterday, meaning the final House vote and ultimate signing is now all but a formality. After the vote, President Donald Trump tweeted “The Unitede [sic] States Senate just passed the biggest in history Tax Cut and Reform Bill”, although as the Financial Times pointed out, this description is disputed by many tax and fiscal policy experts. Housing Market data released yesterday showed better than expected activity in the sector, while the US Current Account deficit was smaller than expected in the third quarter. Today at 15:00 GMT Existing Home Sales data will be released.

UK News - 20/12/2017

Reuters: Too late, Theresa – Brexit offer to EU citizens leaves many cold. LONDON (Reuters) – Back from Brussels with a hard-fought Brexit deal, Prime Minister Theresa May wrote an open letter to the three million citizens of other European Union states living in Britain.

Telegraph: Half of maternity units close their doors to women in labour amid midwife shortage . Half of maternity units had to close their doors to women in labour last year due to shortages of staff, leading midwives have warned.

Daily Mail: Trump will visit the UK but NOT meet the Queen. Donald Trump has told British prime minister Theresa May he will visit Britain in the new year – but will not meet the Queen, it emerged Tuesday. The president and the prime minister instead discussed a ‘working visit’ to London, which is pencilled in for late February.

News in Brief - 19/12/2017

GBP

The major currency pairs were quiet yesterday, which allowed sterling to regain some ground against the US dollar. Politics remained the main focus of news flow, as posturing from both sides of the Brexit negotiations kicked into overdrive. Theresa May’s Cabinet met to discuss the nature of the deal Britain will be seeking, with Brexit Secretary David Davis reported to be preparing to warn the European Union that it could not cherry pick sectoral deals as a part of trade talks. Equally, EU chief negotiator Michel Barnier made similar remarks in reference to the City of London and financial services, clarifying that the “passporting” rights currently enjoyed by UK financial institutions would be lost. For now, the objective of UK negotiating strategy seems to be to attempt to achieve a “cake and eat it” outcome, whereby Britain engages in regulatory divergence, while retaining high levels of access to European markets.

EUR

The euro traded higher against USD yesterday, as the greenback softened generally. European inflation data was bang on expectation in its final reading for November, with the headline Consumer Price Index rising 1.5% and the Core Index, which excludes fuel, rising 0.9%. The core index in particular is rising at more or less the same rate as the last three years. The data calendar today is rather sparse, with the main release being the German IFO Business Climate survey at 09:00 GMT.

USD

USD weakened yesterday, as Friday’s momentum and excitement over tax reform progress proved to be short lived. The House of Representatives is expected to vote on tax reform today, sending the bill to the Senate and then ultimately President Trump for passage into law as earlier as this year, barring any hiccups. Today at 13:30 GMT housing market data will be released include Building Permits and Housing Starts, alongside the Current Account. The Federal Reserve’s Neel Kashkari will at an event in Minnesota, although the timing is unconfirmed.

UK News - 19/12/2017

Reuters: Eurosceptics baulk as May pitches status quo Brexit transition. LONDON (Reuters) – British Prime Minister Theresa May told parliament her plan on Monday for a Brexit transition period with broadly the same access to European Union markets but was met with scepticism from pro-Brexit lawmakers fearful of a watered-down EU exit.

Guardian: UK cannot have a special deal for the City, says EU’s Brexit negotiator. Britain cannot have a special deal for the City of London, the European Union’s chief Brexit negotiator has told the Guardian, dealing a blow to Theresa May’s hopes of securing a bespoke trade agreement with the bloc.

News in Brief - 18/12/2017

GBP

Sterling weakened substantially on Friday, as the boost it enjoyed from the formal announcement of a deal to move Brexit talks on to phase 2 proved to be a sugar rush. This morning’s political headlines are a familiar mix of Tory infighting, posturing from all sides, and dissent from Foreign Secretary Boris Johnson, though none have had a noticeable effect on sterling. This morning’s main release will be Industrial Order Expectations from the Confederation of British Industry, at 11:00 GMT.

EUR

After a brief pause on Friday morning, EURUSD resumed its downwards trend as the greenback continued to pick up momentum. This week’s data calendar will be slow for the single currency, although the final revision for November Consumer Price Index inflation in November will be released this morning at 10:00 GMT. The German IFO Business Climate survey will be released tomorrow.

USD

Dollar strength is emerging as a theme of global markets this morning, as the greenback edged higher overnight after strengthening on Friday, amid optimism that tax reform legislation may finally be passed this week. The legislation as currently proposed would probably only add a very modest uplift to economic growth, but it represents the first major legislative achievement for the Trump administration and Republican Party. Today at 15:00 GMT the NAHB Housing Market Index will be released as the day’s sole major economic data. Tuesday will see more housing market data including Building Permits, and Durable Goods Orders will be released alongside the PCE Price Index on Friday.

UK News - 18/12/2017

Reuters: May to pitch status quo Brexit transition to parliament. LONDON (Reuters) – Prime Minister Theresa May will pitch her plan for a Brexit transition period with unchanged access to European Union markets when she briefs MPs on Monday about her latest negotiating trip to Brussels.

Express: Johnson DEMANDS Britain make a clean break from Brussels as Cabinet truce crumbles. The Foreign Secretary, an ardent Brexiteer, has long raised his head above the parapets of parliament to make clear his vision for the nation’s future.

News in Brief - 15/12/2017

GBP

Yesterday’s Bank of England rate announcement and meeting minutes turned out to be something of a non-event for sterling. The Monetary Policy Committee kept rates unchanged in a unanimous vote, and kept its outlook for the economy, inflation, and rates, more or less unchanged. The fall in net employment reported this week did come up for discussion, but was written off as a quirk of the data as opposed to a concerning development – a judgement that is unlikely to be as easily made if the labour market cools further. Yesterday’s main data release for sterling was monthly Retail Sales, which handily beat expectations to grow 1.1% in November. This morning’s biggest news has been the formal confirmation of last week’s deal to move Brexit talks on from their first phase, which has had a muted impact on sterling.

EUR

The “Draghi effect” may no longer be enough to weaken – or strengthen – the euro by several percentage points in seconds, but the euro did nonetheless weaken during yesterday’s European Central Bank press conference. The core message of the presser was that the ECB had grown more bullish on European growth, but that the eurozone was at an earlier stage in its business cycle than, for example, the United States. Inflation had yet to show signs of a sustainable acceleration, and so the ECB’s easing programme should continue unabated. Draghi batted away questions about the future of QE beyond its current end in September 2018, and the euro sold off.

USD

Despite taking advantage of the euro’s weakness yesterday, USD is looking at its first weekly loss this month, after its sell off in the wake of Wednesday’s Federal Open Market Committee rate hike. US Retail Sales surged by 0.8% in November, while weekly Unemployment Claims were astonishingly low, approaching numbers not seen since the 1970s, when the labour market was far smaller. Purchasing Managers Indices for the Services and Manufacturing sectors were released by Markit, with Manufacturing outperforming and Services falling, while both remaining indicative of overall growth reported by the survey respondents. Today at 13:30 GMT the Empire State Manufacturing Index will be released, followed at 14:15 by Capacity Utilisation and Industrial production.

UK News - 15/12/2017

Reuters: May wins applause from EU leaders for Brexit efforts. BRUSSELS (Reuters) – European leaders applauded British Prime Minister Theresa May for her work so far on Brexit, assuring her at a summit in Brussels that sufficient progress has been made to allow Britain to move on to the next stage of leaving the union.

Guardian: Families with stable jobs at risk of homelessness in Britain, report finds. Homelessness is now a serious risk for working families with stable jobs who cannot find somewhere affordable to live after being evicted by private-sector landlords seeking higher rents, the local government ombudsman has warned.

News in Brief - 14/12/2017

GBP

Sterling had a volatile session yesterday, ultimately closing lower after several intraday swings, one of which included a brief patch of strength spurred on by the morning’s inflation data. November’s inflation data has showed prices increasing in the UK economy by a sliver more than expected. Headline CPI was 3.1% year on year, compared to 3% previously and a median forecast of 3%. The increase was broad based among the various categories. The figures did not come as a surprise, as ultimately the Brexit shock is still working its way through consumer and business behavior. What’s important is that inflation is not expected to accelerate much further from where it is today; if it does continue rising in to 2018, then the BoE will ultimately be forced to react. Yesterday’s Brexit related news included EU Parliament negotiator Guy Verhofstadt publicly admonishing David Davis for suggesting the deal agreed last week was not binding, which triggered a short lived sterling sell off. Today at 09:30 equally important labour market data including the Unemployment Rate will be released.

EUR

The euro reached a fresh low against USD yesterday, and after a brief rally yesterday evening is back on the defensive. Weak survey data was released in the morning, with the ZEW Economic Sentiment missing expectations for both the eurozone and Germany. Today’s calendar is marginally more eventful, having already seen German monthly Consumer Prices and Wholesale prices expand at a rapid rate in November, with wholesale prices expanding 0.5%. Italian Industrial Production will be released at 9:00 GMT, followed by eurozone Unemployment and Industrial Production at 10:00.

USD

The US dollar saw minor gains versus sterling and euro, and mixed results against other G10 currencies. The Democrat Doug Jones triumphed in the traditionally deep red state of Alabama, putting a Democrat on the chair of Senator in this state for the first time in 25 years. This brings the majority that Trump has in the Senate back to 51 against 49, which may handicap his abilities to get any future infrastructure deal past the Senate. The Core Producer Price Index surprised on the upside and showed the fastest month on month increase in prices in 6 years. This afternoon we have the US Consumer Price Index at 13:30 GMT followed in the evening by a rate announcement from the Federal Open Market Committee and Janet Yellen’s swan song in her last FOMC press conference as Fed chair. Yellen’s presser will be accompanied by updated member projections for growth, inflation, and interest rates.

UK News - 14/12/2017

Reuters: Exclusive – After Grenfell fire, same builders rehired to replace dangerous cladding, Reuters finds. LONDON (Reuters) – Some building companies that installed dangerous cladding on social housing blocks across Britain are now winning new contracts following the Grenfell Tower blaze to remove their original work and install panels that can pass safety tests, a Reuters review shows.

Telegraph: New current account rules will not help consumers save money, critics say. New rules set out by the City watchdog aimed at helping customers compare bank accounts have been condemned by consumer groups for not going far enough and failing to help people save money.

News in Brief - 13/12/2017

GBP

Sterling had a volatile session yesterday, ultimately closing lower after several intraday swings, one of which included a brief patch of strength spurred on by the morning’s inflation data. November’s inflation data has showed prices increasing in the UK economy by a sliver more than expected. Headline CPI was 3.1% year on year, compared to 3% previously and a median forecast of 3%. The increase was broad based among the various categories. The figures did not come as a surprise, as ultimately the Brexit shock is still working its way through consumer and business behavior. What’s important is that inflation is not expected to accelerate much further from where it is today; if it does continue rising in to 2018, then the BoE will ultimately be forced to react. Yesterday’s Brexit related news included EU Parliament negotiator Guy Verhofstadt publicly admonishing David Davis for suggesting the deal agreed last week was not binding, which triggered a short lived sterling sell off. Today at 09:30 equally important labour market data including the Unemployment Rate will be released.

EUR

The euro reached a fresh low against USD yesterday, and after a brief rally yesterday evening is back on the defensive. Weak survey data was released in the morning, with the ZEW Economic Sentiment missing expectations for both the eurozone and Germany. Today’s calendar is marginally more eventful, having already seen German monthly Consumer Prices and Wholesale prices expand at a rapid rate in November, with wholesale prices expanding 0.5%. Italian Industrial Production will be released at 9:00 GMT, followed by eurozone Unemployment and Industrial Production at 10:00.

USD

The US dollar saw minor gains versus sterling and euro, and mixed results against other G10 currencies. The Democrat Doug Jones triumphed in the traditionally deep red state of Alabama, putting a Democrat on the chair of Senator in this state for the first time in 25 years. This brings the majority that Trump has in the Senate back to 51 against 49, which may handicap his abilities to get any future infrastructure deal past the Senate. The Core Producer Price Index surprised on the upside and showed the fastest month on month increase in prices in 6 years. This afternoon we have the US Consumer Price Index at 13:30 GMT followed in the evening by a rate announcement from the Federal Open Market Committee and Janet Yellen’s swan song in her last FOMC press conference as Fed chair. Yellen’s presser will be accompanied by updated member projections for growth, inflation, and interest rates.

UK News - 13/12/2017

Reuters: Exclusive – After Grenfell fire, same builders rehired to replace dangerous cladding, Reuters finds. LONDON (Reuters) – Some building companies that installed dangerous cladding on social housing blocks across Britain are now winning new contracts following the Grenfell Tower blaze to remove their original work and install panels that can pass safety tests, a Reuters review shows.

Telegraph: New current account rules will not help consumers save money, critics say. New rules set out by the City watchdog aimed at helping customers compare bank accounts have been condemned by consumer groups for not going far enough and failing to help people save money.

News in Brief - 12/12/2017

GBP

Sterling weakened further yesterday, approaching last week’s lows as various political headlines continued to circulate after Friday’s breakthrough in Brexit negotiations. It is worth noting International Trade Secretary Liam Fox explicitly said yesterday that Theresa May’s Government is seeking a trading relationship with the EU that is “virtually identical” to the current arrangements, further reinforcing the idea that Theresa May is not seeking a hard Brexit. Today’s main data release is inflation from the Office for National Statistics, at 09:30 GMT.

EUR

The euro was once again out of the spotlight yesterday, with a minor rally in its value already having been completely reversed over the course of this morning. This morning’s main data release will be the widely followed ZEW Economic Sentiment Survey, which will be released at 10:00 GMT for both the eurozone as a whole and the crucial German economy. European Central Bank President Mario Draghi will speak at 19:00.

USD

The dollar’s momentum slowed yesterday, after a five day winning streak last week for the weighted DXY index. The Job Openings and Labour Turnover Summary showed open positions falling slightly, after months of near record openings. Today’s data calendar is more eventful, with the NFIB Small Business Index out at 1100 GMT, followed by the Producer Pride Index at 13:30. However, the markets main focus will be tomorrow’s Federal Reserve meeting. The Fed are widely expected to hike interest rates once more, so the main source of interest will be whether there is any change to their current forecast for a further three hikes next year.

UK News - 12/12/2017

Reuters: UK inflation hits nearly six-year high of 3.1 percent, oil puts more pressure on factories. LONDON, Dec 12 (Reuters) – British inflation unexpectedly rose to its highest level in nearly six years in November, tightening the post-Brexit vote squeeze on households whose spending is the main driver of the country’s economy.

Guardian: Surveillance firms spied on campaign groups for big companies, leak shows. British Airways, the Royal Bank of Scotland and Porsche are among five large companies that have been identified as having paid corporate intelligence firms to monitor political groups that challenged their businesses, leaked documents reveal.

News in Brief - 11/12/2017

GBP

G10 FX has had a slow start to the week, and sterling is no exception, trading close to open against most of its major partners after the strength from Friday’s dramatic Brexit developments proved fleeting. This will be a potentially decisive week for sterling, with top tier data releases in the form of inflation on Tuesday, labour market data on Wednesday, and the Bank of England’s latest rate announcement on Thursday. In the meantime Friday’s breakthrough in Brexit negotiations is likely to remain a subject of controversy, with Theresa May reportedly due to tell Ireland that Friday’s announcements are not binding.

EUR

The euro was quiet last week, coming under mild pressure against GBP and USD, and opening well this morning against NOK on weak Norwegian inflation data. A few tidbits of data will be released this week, including the widely followed ZEW survey for the German economy tomorrow morning, and eurozone unemployment on Wednesday. Thursday will see the European Central Bank announce its latest rate decision, including a press conference given by President Mario Draghi.

USD

USD continued to gain broad momentum last week, with the US sovereign yield curve continuing to flatten as market participants prepared for more rate increases from the Federal Reserve, but remained sceptical about the economy’s long term growth trajectory. This week’s Federal Open Market Committee rate announcement on Wednesday is the last major event on the year’s calendar, and will feature updated forecasts for the economy and interest rates, as well as a press conference from outgoing Fed Chair Janet Yellen. Given that job creation remains steady, wages are rising, and the economy is growing a hike at this week’s meeting is all but assured, and USD effects will focus on the messaging surrounding the decision. Today at 15:00 GMT the Job Openings and Labour Turnover Summary will be released.

UK News - 11/12/2017

Reuters: Labour Party looks to move some BoE functions away from London. Britain’s Labour Party is considering moving some of Bank of England’s functions to Birmingham, from its current home in Threadneedle Street in the City of London, according to an interim report on the British financial system released on Sunday.

Telegraph: Lord Kerslake quits as NHS trust chairman over ‘unrealistic’ funding cuts A fundamental review of the NHS is needed to address a financial crisis, Lord Kerslake said, after quitting as the boss of a major hospital trust in protest at funding problems.

Daily Mail: Third of GPs plan to close surgeries to new patients: Doctors say drastic action is needed. One three family doctors plan to close their surgeries to new patients, a survey found. They claim that without drastic action they will be unable to give safe care to those already on their books. One in ten GPs said they had already closed surgery lists to new patients temporarily within the past 12 months.

News in Brief - 06/12/2017

GBP

Sterling has continued to sell off over the past twenty four hours, being weighed down by continued Brexit uncertainty. Theresa May’s Government scrambled to recover after Monday’s scuppering of a potential deal on the Irish border by the Northern Irish Democratic Unionist Party, with Brexit Minister David Davis clarifying in Parliament that the phrase “regulatory alignment”, which was one of the main objections of the DUP, was meant to apply to the whole United Kingdom, not just Northern Ireland. Negotiations and maneuvering will continue today, while the Telegraph is reporting this morning that Theresa May is once again facing internal dissent from Cabinet members including Boris Johnson and Michael Gove. Yesterday’s Services Purchasing Managers Index release for sterling went largely unnoticed, but showed a dip in the confidence reported by survey respondents.

EUR

The euro came under pressure yesterday, including against USD where it reached its lowest level in more than a month. Aside from the morning’s Purchasing Managers’ Index released, which showed a solid level of expansion in the services sector, monthly Retail Sales fell well short of expectations, contracting 1.1% in September after a 0.8% jump in August. This morning’s data has included a good print for German Factory Orders, which rose 0.5% in October, after rising 1.2% in September. Retail PMI at 09:10 GMT is the morning’s other major release.

USD

The US dollar had a solid day yesterday, making inroads against sterling and euro, while the weighted dollar index DXY was up as well.The US Trade Balance deteriorated significantly in October, with exports down 1.8% and imports rising 1.3%. This deterioration was likely enough to negatively impact US growth in the fourth quarter. The November ISM Non-Manufacturing Purchasing Managers’ Index fell compared to last month, though there’s little cause for concern since the score of 57.4 is still in the vicinity of last month’s reading, which was the highest in 12 years. Today at 13:15 the ADP Non-Farm Employment Change will be released and at 15:30 Crude Oil Inventories will be published.

UK News - 06/12/2017

Telegraph: Boris Johnson and Michael Gove lead Cabinet revolt against Theresa May over fears she is forcing a soft Brexit. Theresa May is facing a Cabinet revolt after Brexiteers led by Boris Johnson and Michael Gove expressed “genuine fear” the Prime Minister is trying to force through a soft Brexit.

Guardian: MI5 and police ‘thwart plot to assassinate Theresa May’. Security officials believe they have thwarted an alleged plot to assassinate Theresa May by terrorists who would first bomb their way into Downing Street and then kill the prime minister, it has emerged.

News in Brief - 05/12/2017

GBP

Sterling has once again had an eventful 24 hours, as Brexit negotiations hit yet another snag. The pound rallied powerfully throughout the first half of the day, with various reports indicating that UK Prime Minister Theresa May’s lunch with European Commission President Jean-Claude Juncker would result in the announcement of a provisional deal being struck. However, as the lunch dragged on in to its third hour, sterling’s progress stalled as markets awaited formal confirmation. Unfortunately, at the conclusion of the dinner it was announced that, despite progress, no deal had yet been struck. It later transpired that Theresa May’s partners in Government, the DUP in Northern Ireland, flatly rejected the proposal of “continued regulatory alignment” between Northern Ireland and the European Union, with DUP leader Arlene Foster stating that she was unwilling to tolerate “regulatory divergence” with the rest of the United Kingdom. For today, at 09:30 GMT the Services Purchasing Managers’ Index will be released.

EUR

The euro had another uneventful day, only momentarily down against USD before closing more or less flat. The Sentix Ivnestor Confidence Index for the eurozone fell slightly to 31.0, nonetheless a high level relative to the last couple of years. Producer Prices rose 0.4% as expected in October. Services Purchasing Managers Indices will be released throughout the morning, followed by European Retail Sales and a Gross Domestic Product revision at 10:00 GMT.

USD

EURUSD was relatively quiet yesterday, and the weighted USD index DXY was also basically flat on the day, as no new material information about the tax reform bill came to light. The only data release of note was monthly Factory Orders, which contracted 0.1% in October. Today at 13:30 GMT Trade Balance data for October will be released, followed by Services Purchasing Managers Indices from Markit and ISM at 14:45 and 15:00 respectively.

UK News - 05/12/2017

Reuters: After Brexit deal crumbles, May to speak to Northern Irish party. Prime Minister Theresa May and other British officials will speak to Northern Ireland’s Democratic Unionist Party (DUP) on Tuesday after a tentative deal on Brexit with the European Union over the border with Ireland was dashed at the last minute.

Guardian: The Hague says claims of war crimes by UK troops have ‘reasonable basis’. The chief prosecutor at the international criminal court in The Hague, Fatou Bensouda, has declared there is a “reasonable basis” to believe that UK soldiers committed war crimes against detainees during the Iraq conflict.

News in Brief - 04/12/2017

GBP

Sterling pared its gains from earlier in the week on Friday, and has not shown any signs of regaining momentum this morning. Depending on which headline you’re reading, Theresa May is either on the verge of striking a deal on the Irish border issue, or has failed altogether. The truth appears to be somewhere in the middle, with May heading to Brussels for lunch with Jean-Claude Juncker to present an updated offer that includes an updated and enlarged divorce settlement, with Ireland and the future role of the European Court of Justice remaining two potential sticking points. The day’s major data release will be the Construction Purchasing Managers’ Index at 09:30 GMT. The equivalent Services PMI will be released tomorrow, and later in the week Industrial Output data will be released on Friday.

EUR

The euro has been out of the spotlight somewhat, with political and economic developments aplenty elsewhere in the G10, trading up against USD and GBP on Friday. Monthly Spanish jobs data has missed expectations this morning, while still showing a net increase in employment. Later in the morning at 09:30 GMT Sentix Investor Confidence will be released, followed at 10:00 by the Producer Price Index.

USD

The dollar had a dramatic day on Friday, weakening after US media erroneously reported that Donald Trump’s former top aide, Michael Flynn, was prepared to testify against the President regarding the investigation in to Russian involvement in the Presidential elections. The report came from US news network ABC’s chief investigative reporter, Brian Ross, who was suspended after it was revealed that Flynn’s testimony did not, in fact, contradict the President, and the dollar subsequently recovered ground. Aside from this, the weekend’s big political news was the passage of tax reform legislation through the Senate, after a frantic day of deal making. The Bill will now go through a reconciliation process with that passed by the House of Representatives. Today at 15:00 GMT Factory Orders data will be released. Services survey data will be released by Markit and ISM tomorrow afternoon, and on Friday the Non-Farm Payrolls report will be released.

UK News - 04/12/2017

Guardian: Ireland: no go-ahead for Brexit talks to move on. The Irish government is not immediately ready to approve Brexit talks moving on to the next phase although progress has been made, an Irish minister said at the start of a crucial day for the negotiation process.

FT: Britain and EU on brink of Brexit divorce deal. Britain and the EU are on the brink of sealing a Brexit divorce deal on Monday, as Theresa May travels to Brussels with potential solutions in sight for the two biggest political obstacles to opening trade talks.

Telegraph: Retired detectives who made porn allegations against Damian Green could be prosecuted, Met chief says. Cressida Dick condemned the behaviour of former Scotland Yard officers after they spoke out about porn allegedly found on the the then Deputy Prime Minister’s computer during a raid on a separate matter in 2008.

News in Brief - 01/12/2017

GBP

Sterling had another good day yesterday, extending earlier gains which were driven by overnight political news later in the afternoon and evening. The only major data release was the Nationwide House Price Index, which rose 0.1% in November. No new material news was added to the week’s political developments, which have given sterling a boost on the increasing chances of a breakthrough in Brexit negotiations over the coming weeks. This morning at 09:30 GMT, Markit’s Manufacturing Purchasing Managers’ Index will be released.

EUR

The euro saw further losses to sterling yesterday, but after a brief spot of weakness in the morning, the dollar came under severe pressure in the afternoon and EURUSD quickly headed back up towards levels last seen on Monday. Yesterday’s key data release was European Consumer Price Index inflation, which rose to 1.5% year on year in November, slightly less than expected. The core index, which does not include fuel, was up only 0.9% year on year, broadly unchanged over the last couple of years. Eurozone Unemployment, however, fell further to 8.8%, compared to 10% as recently as Q4 last year.

USD

After a relatively uneventful start to the day, USD came under heavy sell pressure in the afternoon, possibly related to end of month portfolio rebalancing trades from large institutional investors. The afternoon’s data was reasonably encouraging, if anything: Personal Spending and Income data for October beat expectations, while the Personal Consumption Expenditures Price Index rose 0.2% on the month. The Chicago Purchasing Managers’ Index dropped slightly from the 6 year high seen last month, while still reflecting rapid activity growth among the surveyed businesses. Today at 14:30 the Federal Reserve’s Robert Kaplan will speak, followed at 14:45 GMT and 15:00 by Manufacturing survey indices from Markit and ISM. Kaplan’s Fed colleague Harker will speak at 15:15.

UK News - 01/12/2017

Telegraph: Donald Trump’s ‘working visit’ to UK dropped as tensions with Theresa May grow over president’s far-Right retweets. US diplomats have dropped plans for Donald Trump to conduct a visit to Britain in January amid a war of words between the two countries’ leaders.

Guardian: Fortnum & Mason struggling to recruit staff after Brexit vote. The boss of Fortnum & Mason says the world famous London store is struggling to recruit staff after the Brexit vote with the situation most acute in its restaurants.

News in Brief - 30/11/2017

GBP

Sterling hit a two month high against USD overnight, as good news on the political front continued to break. After Monday’s reports that a financial settlement had effectively been reached in Brexit talks, The Times reported overnight that a “negotiator” had said a breakthrough on the Northern Ireland border issue was developing. The border issue is the last substantial block to true trade negotiations starting, ahead of a major EU summit on December 14th. Notably, Eurosceptic elements of the Conservative Party have been quiet this week, with no major figures attempting to blast May’s concession on the divorce bill. Nationwide’s House Price Index was released this morning, showing a 0.1% increase in November.

EUR

EURUSD traded sideways yesterday, after the euro pared back some of its recent gains on Tuesday. The crucial story of the last week has been the possible resumption of coalition talks between Angela Merkel’s CDU party and former partners the Social Democrats. Although t here’s been no major breakthroughs, news emerged that the Social Democrats are in the process of passing party resolutions to enable the party leadership to negotiate for a coalition. Yesterday’s data included survey figures from the European Commission that showed various confidence indices at multi decade highs, including a 10 year high for the Economic Sentiment Indicator. Employment plans from businesses were the most optimistic in 30 years, further underlining the drastic turnaround in the eurozone’s economic fortunes over the last couple of years. This morning’s main release will be eurozone Consumer Price Index inflation at 10:00 GMT, which will be accompanied by the Unemployment Rate.

USD

Although USD struggled to make inroads against the euro and weakened to sterling, the greenback did not perform too badly yesterday and made enough gains elsewhere to leave the weighted USD index DXY trading flat on the day. Gross Domestic Product growth in the third quarter was revised up to an annualised rate of 3.3%, as forecast, as the additional data available since the advance estimate indicated the economy had seen more investment than previously thought. Pending Home Sales also rose by substantially more than expected in October, rising 3.5% to buck the downwards trend seen in recent months. Today at 13:30 GMT Personal Spending and Income data will be released, alongside the crucial Personal Consumption Expenditures Price Index, the Federal Reserve’s preferred inflation measure.

UK News - 30/11/2017

Reuters: Trump hits out at May over criticism of sharing far-right videos. U.S. President Donald Trump sharply rebuked British Prime Minister Theresa May on Twitter after Britain criticised him for retweeting anti-Islam videos originally posted by a leader of a British far-right fringe party.

Guardian: NHS plans to ration care access in bid to force through extra funding. NHS bosses are to meet to discuss plans to ration and delay patients’ access to care, which could set them on a collision course with ministers over health funding. NHS England’s board will publicly debate what the service will and will not be able to afford to do next year after Philip Hammond gave it less than half the extra money it said it needed.

Times: Britain close to Irish border deal. EU leaders are preparing to offer a two-year Brexit transition deal as early as January after negotiators said that they were close to a breakthrough over the Northern Ireland border.

News in Brief - 29/11/2017

GBP

Sterling was trading down yesterday, before news emerged in the evening that Britain and the EU have reached a preliminary agreement on the Brexit divorce bill, previously a sticking point in negotiations. The news, if confirmed, would represent a significant milestone in Brexit negotiations, which could then proceed to substantive matters of trade and a transitional agreement. The question of the Irish border remains a stumbling block, as does the stability of Theresa May’s Government, which may struggle to find enough internal political support for the concessions. Last night’s price action also shows the extent to which headline risk remains a factor for sterling – any setbacks or near collapses in talks are likely to be felt just as keenly as last night’s good news.

EUR

The euro sold off to both GBP and USD yesterday, although for different reasons, with USD well bid due to progress in tax reforms and sterling rallying last night on political news. Yesterday’s data included an on-expectations print for German GfK Consumer Climate. This morning’s data has included a surprise contraction in monthly French Consumer Spending, which fell 1.9% in October, and a miss for Spanish Consumer Price Index inflation, which rose by 1.6% year on year, unchanged from last month and below expectations.

USD

USD performed well in a broad sense yesterday, with the weighted USD index DXY rising as tax reform legislation continued to make slow progress, ahead of a vote as early as tomorrow. The Senate budget committee yesterday voted to send the Republican tax bill to the floor for a vote, in a sign of building momentum for the bill. The majority of economist opinion remains united in concluding the long term effect of the bill on growth will not be a game changer for the economy, but the legislative progress may nonetheless be taken as a positive for the dollar. Incoming Federal Reserve Chair Jerome Powell testified on his nomination yesterday, and was utterly true to form, steering well clear of fiscal policy, cautiously hawkish on rates, and advocating a light regulatory approach. Today at 13:30 GMT revised Gross Domestic Product growth data will be released, and at 15:00 outgoing Fed Chair Janet Yellen will testify to lawmakers.

UK News - 29/11/2017

Guardian: Paying Brexit bill is Britain’s obligation to EU, says Grayling. The reported financial settlement the UK is set to pay on leaving the European Union would be “meeting the obligations we’ve built up, no more or less than that”, one of the cabinet’s leading Brexiters has said.

Sun: FINAL COUNTDOWN Brexit divorce bill amount – how much will leaving the EU cost UK taxpayers?. Theresa May has tabled a whopping offer to the EU in a bid to move talks forward and start negotiating a future trade deal, European sources have said. The deal is set to be formally offered to Jean-Claude Juncker when the PM meets him on December 4.

News in Brief - 28/11/2017

GBP

Aside from a brief patch of volatility, this morning’s Financial Stability Review and Bank Stress Test results from the Bank of England have passed without incident for sterling. The seven largest lenders tested in the exercise passed the stress test, despite the BoE modelling a doomsday scenario where the domestic economy contracts 4%, global growth is -2.4%, and large falls are seen in domestic and international property prices. The Banks were also resilient to a “disorderly Brexit”, without a transitional agreement with a smooth change to new trading arrangement with the EU. Speaking to reporters, Mark Carney went as far as recommending how long he thought a Brexit transition period to be – 18 to 24 months at the least, to be agreed “the sooner the better”.

EUR

The euro maintained its momentum for most of the day yesterday, reaching a two month high against USD, before the greenback found its legs and began to rally, leaving EURUSD trading lower this morning. The selloff seen in Chinese equities continued overnight, but was of little benefit to the single currency, as past risk-off moves have been occasionally. This morning’s data will include the German GfK Consumer Climate survey at 12:00 GMT.

USD

After a mixed start to the week, USD began to regain momentum yesterday afternoon and has had a mini rally since then. Monthly New Home Sales data showed sales surging to their highest level in a decade, beating expectations by a wide margin. The calendar gets significantly more interesting today, with several data releases in the afternoon and nomination testimony from the incoming Federal Reserve Chair Jerome Powell to lawmakers. The Goods Trade Balance will be released at 13:30 GMT, accompanied by Wholesale Inventories. House Price Indices from the FHFA and Case Shiller will be released at 14:00, followed at 15:00 by CV Consumer confidence and the Richmond Manufacturing Index. Powell’s testimony will start at 14:45, although new information on monetary policy seems extremely unlikely given he has already released a statement in support of policy continuity.

UK News - 28/11/2017

TELEGRAPH: David Davis under fire for 'editing' 58 reports into economic effect of Brexit - saying they will not damage EU talks. Dozens of studies into the impact of Brexit on various parts of the economy do not contain any information which will damage the negotiations with the European Union, David Davis has said.

REUTERS: UK banks could cope with "disorderly" Brexit, Bank of England says. Britain's banks could cope with a "disorderly" Brexit without needing to curb lending or be bailed out by taxpayers, the Bank of England said on Tuesday after carrying out its annual health check on lenders.

News in Brief - 27/11/2017

GBP

Sterling has shrugged off the weekend’s headlines about ongoing Brexit negotiations to trade broadly flat vs USD compared to Friday afternoon, while avoiding further losses against the euro also. Politics will remain in focus this week, as Theresa May attempts to find a solution to the Northern Ireland border issue ahead of a crucial European leaders summit on the 14th December. In the meantime, Ireland’s Taoiseach Leo Varadkar is attempting to avoid a snap election, potentially complicating any negotiations. No data will be released today, but the Bank of England’s Chief Economist Andy Haldane will speak at 14:30 GMT. Later in the week, BoE stress test results will be released alongside the latest Financial Stability Report on Tuesday, and Manufacturing Purchasing Managers’ data will be released on Friday.

EUR

The euro regained its mojo against both sterling and USD last week, as it the likelihood of Angela Merkel managing to hack together a coalition appeared to increase. The euro was further strengthened by the release of the German Ifo Business Climate survey, which showed business confidence in the eurozone’s largest economy is at all-time record highs. Politics will remain firmly in focus this week for the euro, as Merkel begins coalition talks with her former partners, the Social Democrats. Nonetheless, talks are expected to be protracted, and a conclusion seems unlikely this week. No euro data will be released today, and the calendar will see a slow start tomorrow morning with German Import Prices and Money Supply. Later in the week, the Flash Estimate of eurozone Consumer Price Index inflation will be released on Thursday.

USD

The US heads back to work in earnest after Thanksgiving this week, and politics is likely to remain a key driver for USD, which remains on the back foot against the euro despite halting its losses on Friday night. Republican lawmakers are reported to be racing to pass Tax Reform legislation by the end of the year, meaning USD-relevant details may emerge throughout the week, though the vast majority of economists do not believe the tax plan as currently mooted will have a substantial beneficial effect on the economy. New Home Sales will be released today at 15:00 GMT, followed by a speech from the Fed’s Neel Kashkari at 22:30. Later in the week, preliminary Gross Domestic Product growth for the third quarter will be released on Wednesday, followed by the Personal Expenditures Price Index on Thursday.

UK News - 27/11/2017

REUTERS: No Irish border deal before EU trade agreement - British minister. LONDON (Reuters) - Britain will not resolve the question of the Irish border after Brexit until it has also agreed the outline of a trade deal with the European Union, the country’s International Trade Minister Liam Fox said on Sunday.

GUARDIAN: White paper to set out industrial strategy in bid to boost UK productivity. The government is to highlight five key areas where the UK needs to improve its performance when it reveals on Monday the details of a new industrial strategy designed to increase productivity.

SUN: MAY COURT OUT Theresa May is thinking of handing the European Court of Justice a referral system for EU nationals in post-Brexit Britain. The Sun today reveals reports that she has held talks about a referral system to the ECJ for EU nationals who stay here. UK judges would refer a case to Luxembourg if a query arose on a point of law that has not previously been addressed during our time as a member state..

News in Brief - 24/11/2017

GBP

Sterling’s seven day winning streak against the US dollar finally came to an end yesterday, as GBPUSD pared its recent advances back slightly. Yesterday’s data included an unrevised 04% reading for Gross Domestic Product growth in the 3rd quarter, and growth of 0.2% and 0.4% respectively in Business Investment and the Index of Services, both of which enjoyed large upwards revisions to growth in the second quarter. This morning’s headlines have included some comments from Theresa May, who spoke to media in Brussels, reinforcing how eager the UK is to move Brexit talks on from divorce payments to a transitional agreement and future trade arrangements. The Telegraph reported this morning that May will tell Donald Tusk that she is prepared to give more ground on the Brexit divorce bill in exchange for progress in talks, potentially a sterling positive development if May’s gambit is successful.

EUR

Favourable headlines from Germany have helped the euro further consolidate its gains versus USD yesterday, as official sources from the previously coalition-averse SPD party confirmed that they were open to talks with Angela Merkel’s ruling CDU. Yesterday’s meeting minutes from the ECB showed a broad consensus in the ECB’s recent reduction and extension of bond buying, although several members were reportedly concerned that markets expected too much from the ECB beyond the current programme. This morning’s biggest release has been the IFO German Business Climate survey, which showed a record high in optimism among the surveyed German businesses.

USD

The weighted USD index DXY traded flat yesterday and overnight, as the United States enjoyed Thanksgiving and no data was released. Today at 14:45 BST the US flash Manufacturing and flash Services PMIs will be published, while US news flow focuses on the ongoing net neutrality battle and embattled US Senator Roy Moore.

UK News - 24/11/2017

SUN: TAKEGOVER Leave campaign boss Michael Gove has won Theresa May’s backing in a cabinet tussle over clean break from EU. LEAVE campaign boss Michael Gove has won Theresa May’s backing in a furious Cabinet tussle over a clean Brexit from all EU rules, friends say. The PM’s top table is bitterly split over how close to stick to regulations issued by Brussels after the UK leaves.

REUTERS: May calls on EU to move with Britain to open Brexit trade talks. British Prime Minister Theresa May repeated her wish on Friday to make a joint move with the European Union to open negotiations on a post-Brexit trade deal.

News in Brief - 23/11/2017

GBP

Yesterday marked seven consecutive sessions of sterling appreciation against USD, despite the Autumn Budget delivered by Chancellor Phillip Hammond featuring large downgrades to the official growth forecast. Phillip Hammond was dealt an exceptionally poor hand by the OBR, which downgraded its growth forecasts out to 2022 significantly. However, markets responded positively to the fact that the Chancellor responded with a bolder than expected spending package, with NHS funding and giveaways on fuel duties and first home buyers the focus. The net effect of the budget’s spending plan, combined with the lower growth forecast, means that government borrowing is expected to be substantially higher over the coming years, though should still fall in percentage terms relative to overall GDP. This morning’s data has included the second estimate of Gross Domestic Product in the second quarter, which confirmed the expected 0.4% growth.

EUR

After a slow start to the week the euro made significant inroads against USD yesterday, and has maintained a firm tone this morning on the news that Germany’s second largest party, the SPD is ready to discuss a potential coalition with Chancellor Angela Merkel. SPD leader Martin Schulz had previously ruled out support for Merkel after their previous coalition had left the party suffering in the last election. Yesterday’s only data release of note was the Eurozone Consumer Confidence index, which came in at 0, which indicates no change. The figure seems somewhat more cheerful, however, when one considers the fact it is the best reading since 2007, and that a reading below 0 represents overall pessimism among survey respondents. This morning’s data has included some explosively strong French, German and Eurozone Manufacturing and Services Purchasing Managers Indices, with all of the readings exceeding expectations and suggesting extremely high confidence among the surveyed businesses. At 12:30 GMT meeting minutes from the European Central Bank’s most recent monetary policy meeting will be released.

USD

The US dollar is on the back foot this morning, despite the release of the minutes last night from the most recent Federal Reserve policy decision meeting, which showed an overwhelmingly positive outlook for the US economy by policymakers. All but confirming the next interest rate hike in December, the Fed noted multiple areas of positive development, most notably the fact that the labour market is operating “at or above full employment” and that GDP being likely to “grow at a pace exceeding that of potential output”. Combined with the fact that the slowdown in inflation was attributed to “temporary or idiosyncratic factors”, the path looks set for multiple further interest rate hikes next year. However, the Fed did express concern that financial markets may be overheating, which would call in to question the wisdom of raising interest rates too quickly, and as a result, the greenback is being sold off against almost all its major pairs today.

UK News - 23/11/2017

REUTERS: Waiting for May, Brussels eyes December Brexit deal. BRUSSELS (Reuters) - When Theresa May visits Brussels on Friday, EU negotiators will be listening intently for signs the British prime minister is preparing to risk a domestic backlash and raise her offer to secure a Brexit deal in December.

GUARDIAN: Chancellor targets English regions with multibillion investment. English regions including the north and the Midlands will receive a multibillion-pound investment in an effort to reduce the weighting of the economy towards London. Speaking as he announced plans aimed at improving transport links and devolving more power to the regions, Philip Hammond said “far too much of our economic strength is concentrated in our capital city”.

News in Brief - 22/11/2017

GBP

Sterling traded sideways yesterday, ahead of today’s Autumn budget statement from Chancellor Phillip Hammond. Yesterday’s Industrial Order Expectations index from the Confederation of British Industry showed order books at their strongest for almost 30 years, as sterling’s weakness over the past year has its expected effect on the competitiveness of UK goods. Members of the Bank of England’s rate setting Monetary Policy Committee testified to lawmakers, although little new information about the outlook for monetary policy was given. Thus, eyes will be on Chancellor Phillip Hammond, who will today deliver a career defining budget, with both Theresa May’s Government and his own position under attack from multiple directions. UK macro data is reasonably strong at the moment, and sterling has responded somewhat favourably to ongoing efforts to progress Brexit negotiation. A budget that delivers productivity boosting measures while avoiding growth-harming spending cuts could plausibly be good for sterling, while another series of failed proposals like those in the March Budget could risk the Chancellor’s role.

EUR

EURUSD closed not far from open yesterday, as markets waited in vain for some form of news about the future of Germany’s government. Various news outlets are reporting this morning that Angela Merkel is making a renewed attempt at a “grand coalition” with her previous partners, the Social Democrats, a prospect that the party previously rejected, but would stave off another election. Today at 15:00 GMT eurozone Consumer Confidence figures will be released.

USD

USD highlights of the past 24 hours have included fresh all-time highs against the Turkish Lira, and some weakness, notably against the Japanese yen, after outgoing Fed Chair Janet Yellen spoke once again against tightening rates too quickly. The data calendar is more eventful today, and includes Durable Goods Orders at 13:30 GMT, accompanied by weekly Unemployment Claims. Expectations are high for the Core Durable Goods Series, which excludes volatile items like transportation, and rose 0.7% last month. Minutes from the Federal Open Market Committee’s latest meeting will be released at 19:00 GMT, and as always have the potential to provide some insight into the balance of opinion on the committee.

UK News - 22/11/2017

TELEGRAPH: Judges under 'intolerable pressure' from social media, says new Lord Chief Justice. In his first interview since becoming the most senior judge in England and Wales last month, Sir Ian Burnett warned that abuse of judges "undermines the rule of law" and damages confidence in the judiciary.

REUTERS: Britain to detail Brexit bill when EU agrees to move talks forward. Prime Minister Theresa May will only detail how big a divorce settlement Britain is willing to pay the EU when the bloc gives a commitment to moving talks forward, according to a plan rubber-stamped by even her most pro-Brexit ministers.

DAILY MAIL: The EU is insulting Britain by demanding a huge payment before discussing trade, says a top GERMAN politician. The EU is ‘insulting’ Britain by demanding a huge upfront payment before talking about trade, a senior German politician said tonight. Hans-Olaf Henkel said EU negotiator Michel Barnier was trying to get Britain to ‘name a price without knowing what you are going to get for it’.

News in Brief - 21/11/2017

GBP

The week got off to a slow start yesterday, with subdued volatility on many major fx pairs. Sterling maintained its momentum against USD and EUR, shrugging off any domestic political headlines. The Bank of England’s Dave Ramsden spoke in London, saying that Brexit was reinforcing the low growth in productivity seen in recent years. Today at 10:00 GMT we will hear a whole lot more from the BoE, as senior Monetary Policy Committee members including Governor Mark Carney testify to Parliament’s Treasury Committee. Given the pessimistic assessment of potential growth in the last Inflation Report, the MPC will have plenty to talk about, and potentially conflict with the committee’s predominantly Conservative membership, as has been the case in the past.

EUR

Political risk continued to weigh on the euro yesterday, as Angela Merkel suggested that she was not interested in a minority government, suggesting that either coalition talks will be restarted, or Germany will head to the polls in a snap election. The situation remains very fluid and either outcome remains entirely plausible, with the euro almost certainly likely to take a leg lower in the event of a snap election. No headline euro data will be released today, meaning the focus on German politics will be all the more intense.

USD

Euro weakness this week seems to have given the US dollar an opportunity to rally, and the greenback was generally well bid on a number of pairs including against CAD, EUR, JPY, and AUD yesterday and overnight. Yesterday’s data included a strong beat on the CB Leading Index, an amalgamation of various forward looking economic indicators. Janet Yellen, who recently said she would be stepping down from the Federal Reserve’s Board altogether upon the end of her tenure as Chair, will speak today at 23:00 GMT.

News in Brief - 20/11/2017

GBP

Sterling trended up against the US dollar last week, and has opened this week in a similar fashion, while also performing well against the euro. The weekend’s political developments have seen the prospect of an increased offer for “divorce” payments to the European Union become likely, as Theresa May seeks to break a deadlock in negotiations. Such a breakthrough would likely prove sterling positive. No headline data will be released today, But the Bank of England’s David Ramsden will speak at 18:30. Later in the week, the Autumn Budget will be released on Wednesday.

EUR

It’s been some time since the euro has felt the effects of political turmoil, but over the weekend the single currency sold off slightly as German coalition talks collapsed. The centrist Free Democrats party pulled out of negotiations, saying that it was better not to govern, than govern badly, raising the prospect of another election. One of the core differences between potential coalition partners was refugee policy, with several key parties other than Angela Merkel’s CDU wishing to take a harder line on the issue. This morning’s data has included a firm print for the German Producer Price Index, and European Central Bank President Mario Draghi will testify to European lawmakers today at 14:00 BST.

USD

The dollar came under pressure last week on the whole, but given the euro’s political turmoil over the weekend the greenback seems to have an opportunity to reverse last week’s losses on EURUSD. No headline data will be released today, but the week will see some very dollar-relevant events beginning Tuesday with a panel discussion featuring Janet Yellen and former Bank of England Governor Mervyn King. Wednesday is also a red letter day with Durable Goods Orders released ahead of the latest meeting minutes from the rate-setting Federal Open Market Committee

News in Brief - 17/11/2017

GBP

Sterling was relatively stable yesterday, picking up a handful of basis points against USD and EUR, with its momentum continuing this morning. October’s retail sales report showed that year on year growth in retail sales plummeted to its lowest level since 2013, but this was partly influenced by a particularly strong burst of growth in sales at the end of last year. Monthly sales in October were actually fairly solid, rising 0.3%, better than expected. Ultimately the takeaway from October’s report is that the UK consumer remains under pressure from falling real wages, and can’t be relied on to deliver the kind of spending that propped the economy – and sterling – up in recent quarters. On a short term basis the modest growth we’ve seen in recent months is indeed somewhat encouraging, but with real wages likely to shrink further it’s difficult to avoid the conclusion that the outlook for consumer spending in the UK remains bleak.

EUR

Euro news flow was subdued yesterday, and the single currency retreated slightly against GBP, while drifting lower against USD. Final eurozone Consumer Price Index data for October showed headline inflation at 1.4% year on year, broadly consistent with the trend in recent months. This morning’s data has included the eurozone’s Current Account, which showed XXX. Elsewhere, Angela Merkel is expected to press ahead with coalition talks today, after reportedly fruitless all night negotiations with potential partners.

USD

The dollar has come under pressure overnight, notably against the yen where it has dropped to its lowest level since last month. Further progress on tax reforms has been made with the House of Representatives finally voting through a tax cut bill, although the fiscal implications of the package may increase US government debt by $6.9bn, according to one economic model. More optimistic assessments of the bill place the net deficit effect at around $1tn. Yesterday’s data releases included a higher than expected amount of weekly Initial Jobless Claims, a miss for monthly Import Prices, and a worse than expected reading for the survey based Philly Fed Manufacturing Index. Today at 13:30 BST monthly Building Permits and Housing Starts will be released.

News in Brief - 16/11/2017

GBP

Sterling was making gradual inroads against the USD during the morning, only to see all of its gains evaporate after the dollar found its feet at the start of the afternoon. Against the euro, the day was lived in reverse; a morning with sterling weakness was later compensated during the afternoon. This morning brought the British pound some weakness for breakfast after Politco reported the European Union had turned down British attempts to establish a bespoke trade deal with the EU. The story based on leaked documents mentioned that the stance of the EU is “no direct branching in areas like financial services” and only “limited EU commitments to allow cross border provision of services”. Average Weekly Earnings were slightly stronger than expected with an annualized growth in the last 3 months of 2.2%. Today at 9:30 BST we have Retail Sales, concluding the UK triad of top tier releases of this week.

EUR

The euro was on a solid rally yesterday throughout the morning, extending the gains it made earlier this week against most of the G10 currencies. A bit after midday euro began to retreat, but not before putting a four week high on the board against USD and breaching multi-year record highs against Scandinavian currencies. Global risk sentiment seems to have been the driver behind this euro strength. Little data was released for the Eurozone yesterday, besides the French final Consumer Prices that grew 0.1% as expected in October. Today we have the final Consumer Price numbers for the entire Eurozone at 10:00 BST.

USD

The US dollar weakened across the board during the morning, only to turn things around after midday and close more or less at the same place where it started against sterling, euro and a crowd of other currencies. The Consumer Price Index came in “unexpectedly on expectations” after having core CPI disappointing in 6 out of the last eight months. Now CPI seems to be making its way back to its trend level of 0.2% growth per month the story of the Federal Reserve that the weak inflation seen earlier this year was due to transitory factors is gaining in credibility. Core Retail Sales disappointed but a strong headline reading, supported by hurricane-boosted car sales, made up for this and started the USD afternoon rally. Today at 13:30 BST we have unemployment claims together with Import Prices and the Philly Fed Manufacturing Index, followed by Industrial Production at 14:15 BST.

UK News - 16/11/2017

FT: Banks urge Brexit trade deal that keeps financial services on track Free movement for professionals vital to preserving cross-border flows, says industry. Britain’s banking industry has called for a post-Brexit trade deal to allow financial services professionals to continue travelling freely across Europe on assignments of up to three years. The proposal, coming shortly after David Davis, the Brexit secretary, promised to seek a similar travel regime for bankers, is one of several recommendations in a report to be published on Thursday by UK Finance, the industry body, and law firm Clifford Chance. The report presents the most detailed blueprint of how a long-term agreement on financial services between the UK and EU might work in preserving the cross-border flow of trading, capital and staff after Brexit.

Reuters: UK retail sales fall on year for first time since 2013 as inflation and tough comparison weigh. British retail sales recorded their first year-on-year decline since 2013 last month, despite solid growth in volumes from September, as households battled with fast-rising prices.Britain’s Office for National Statistics said October’s 0.3 percent year-on-year fall in sales volumes was the biggest since March 2013 and reflected a very strong performance by retailers in October 2016. Looking at the three months to October, which smooths out monthly volatility in the data, sales growth picked up to 0.9 percent from 0.7 percent in the three months to September. Compared with a year earlier, however, sales volumes in the three months to October were just 1.1 percent higher than the year before, the weakest growth rate since May 2013.

News in Brief - 15/11/2017

GBP

Dollar weakness allowed GBPUSD to rally yesterday, despite a soft inflation print and ongoing political farce in the UK, but the pound was less fortunate against the euro, where it fell to fresh lows for the month yesterday and again this morning. Yesterday’s parliamentary shenanigans included prominent Conservative MPs defying the Government’s efforts to legislate a fixed date for Brexit, despite – in MP Dominic Grieve’s words – “blood-curdling threats”. YEsterday’s inflation data showed price pressure broadly unchanged in the UK, with the headline Consumer Price Index remaining at 3.0% year on year, the same as last month. This morning’s labour market data has put further mild pressure on the pound, after the Unemployment Rate remained unchanged at 4.3% in September and Average Weekly Earnings growth remained at 2.2%.

EUR

The euro has had an incendiary 24 hours, after yesterday’s firm German GDP data combined with renewed global risk aversion overnight to create perfect conditions for strength in the single currency. Yesterday’s data included a firm print for the German ZEW Economic Sentiment Survey, which rose to 18.7 in its latest index reading, although eurozone Industrial Production fell by 0.6% as expected, after a big 1.4% increase previously. Today at 10:00 BST monthly Trade Balance data will be released for the eurozone.

USD

The dollar took an absolute beating yesterday, as investors sold global risk assets and US treasuries saw falling yields across large parts of the sovereign curve. Fed Chair Janet Yellen appeared on a panel with her colleagues Kuroda (Japan), Carney (UK) and Draghi (ECB), and although the topic was central bank communications, a few interesting tidnits emerged when Yellen acknowledged the difficulty of policy makers expressing views on how they would vote ahead of a meeting. The Producer Price Index rose 0.4% in October, far above expectations, but this did little to support the Greenback. Today’s Consumer Price Index and Retail Sales releases at 13:30 GMT are therefore make or break for the greenback, and they will be followed by Business Inventories at 15:30 BST.

UK News - 15/11/2017

FT: Pro-EU rebel Tories hit back after being branded ‘mutineers’. Skirmish reflects rising tensions over Brexit legislation. Pro-EU Conservative MPs have reacted defiantly to a front-page article in the Daily Telegraph depicting them as “mutineers” because of their opposition to elements of the government’s Brexit legislation. In a skirmish that reflects growing tension in the Tory party, Anna Soubry, a backbencher, accused the newspaper of engaging in a “blatant piece of bullying”, while Heidi Allen, a colleague, challenged Brexiter critics to “bring it on”. Pro-EU Tories have also threatened to rebel over government attempts to impose a fixed exit date — March 29 2019 at 11pm London time — which they say would tie Britain’s hand in talks.

Reuters: UK employment falls in third quarter, pay growth lags inflation again. Reuters Staff The number of people in work in Britain fell by the most in more than two years in the three months to September, a latest sign of weakness in Britain’s Brexit-bound economy, official data showed on Wednesday. At the same time, the inactivty rate – a measure of people not in work and not seeking a job – rose by the most in nearly eight years, the Office for National Statistics said. The data showed the unemployment rate held at a four-decade low of 4.3 percent as the number of people in employment fell by 14,000 and pay growth remained much slower than inflation. The ONS said workers’ total earnings, including bonuses, rose by an annual 2.2 percent in the three months to September, compared with 2.3

News in Brief - 14/11/2017

GBP

Political turmoil finally began to weigh on sterling yesterday, leading to losses against EUR and USD. The UK’s chief Brexit negotiator David Davis spoke in the House of Commons yesterday and tried to appeal to Tory backbenchers when he told the parliament will be allowed to vote on the final Brexit deal coming out of the negotiations. Today at 9:30 BST the Consumer Price Index and the Producer Price Index will be made public. Bank of England Mark Carney will speak at 10.00 BST at the ECB conference in Frankfurt, alongside the Bank of Japan’s Kuroda and Mario Draghi of the European Central Bank.

EUR

After a quiet day yesterday, the euro enjoyed a modicum of strength this morning against the greenback based on some smashing German data. The first reading of the GDP jumped to 0.8% in the third quarter, bringing year on year growth. A solid reading in the final quarter might bring the German growth close to a scorching 3% annual growth. At 10.00 BST we will see the flash GDP reading for the entire eurozone, the ZEW Economic Sentiment survey and Mario Draghi speaking at a central bank communications conference hosted by the European Central Bank in Frankfurt.

USD

The weighted USD index DXY traded more or less flat on the day yesterday, though gains made against sterling stood out. The Republican Party continues to attempt to make progress on reconciling different tax reform bills proposed by Congress and the Senate, with last week’s news about the Senate proposing a delayed implementation for corporate tax cuts still reverberating in media. Outgoing Federal Reserve Chair Janet Yellen will also join the panel discussion with Draghi, Carney and Kuroda at the ECB conference at 10.00 BST. US Producer PRices are due at 13:30 BST.

UK News - 14/11/2017

Reuters: Weaker than ever, May faces test in parliament over Brexit plans Prime Minister Theresa May’s blueprint for Britain’s exit from the European Union faces a crucial test starting on Tuesday, when members of parliament try to win concessions from a weakened leader on the government’s legislation to sever ties. It is yet another battle for May after scandals and gaffes that have brought questions about her leadership into the open. As many as 40 of her MPs would support a no-confidence motion against her, according to the Sunday Times newspaper. But many sources in her governing Conservative Party say now is not the time to force her out because despite backing Britain remaining in the EU, even if reluctantly, they think she is still the best option to deliver Brexit.

FT: Euro climbs after German GDP data beat estimates The common currency got a boost on Tuesday after Germany reported stronger than expected economic data that provided the latest evidence of the acceleration of the eurozone’s biggest economy. Germany’s economic output climbed at a sequential clip of 0.8 per cent in the third quarter, exceeding economist expectations of 0.6 per cent. The report was the most recent sign of strength for the bloc’s powerhouse and bolsters the case for the European Central Bank to begin tightening monetary policy next year.

News in Brief - 13/11/2017

GBP

After a solid performance on Friday, sterling has gotten out of the wrong side of the bed this morning, erasing almost all of last week’s gains versus the US dollar. UK politics was once again thrown into upheaval as reports emerged yesterday that the amount of Conservative party MPs willing to sign a vote of no confidence in Theresa May’s leadership was approaching the critical threshold for a challenge to the Prime Minister’s position. Politics is therefore likely to dominate sterling this week as every scrap of information about the likelihood of May getting deposed is priced into financial markets. There are some top tier data releases on the calendar, including Price Indices on Tuesday and Labour Market data on Wednesday.

EUR

After ending last week stronger amid a wave of risk aversion in global markets, the euro sold off slightly overnight. This morning’s data has included German Wholesale Prices, which changed 0.0% in October after a 0.6% spike last month. No further data will be released today, but the eurozone calendar livens up tomorrow with German Gross Domestic Product data out early in the morning, followed by eurozoneGDP and the widely followed ZEW Economic Sentiment Survey later in the morning.

USD

USD was well bid overnight, after coming under broad pressure in the second half of last week. Donald Trump’s visit to Asia continued with a surprise serenade from Rodrigo Duterte, who sung hit Filipino love song “You are the light” at a dinner in Manila. The Philippines President’s regime has been widely criticised by human rights groups for a ferocious campaign of extrajudicial killings against alleged drug dealers, something Trump has praised Duterte for doing an “unbelievable job” with, despite tensions in the two leaders’ public communication at other times. The tax reform debate will continue to rage in the United States this week, as the two houses of Congress attempt to reconcile and pass legislation, with possible consequences for USD. This will be a busy week for data, although no headline releases are scheduled for today. Producer Prices will be released tomorrow, followed by Consumer Prices on Wednesday alongside Retail Sales.

UK News - 13/11/2017

FT: Pound drops after Theresa May no-confidence report. Sterling hit as Tory MPs said to plan challenge against UK prime minister. The pound fell fast on Monday following reports over the weekend that a group of Conservative members of parliament had agreed to sign a letter of no-confidence in Theresa May, UK prime minister.The moves wiped out more modest gains made by the pound on Friday, following a press conference from UK and EU Brexit negotiators. Monday’s heavy selling underscored sterling’s vulnerability to political factors such as the UK’s talks on the terms of its departure from the EU. A report in The Sunday Times said that 40 MPs had agreed to sign the letter of no-confidence amid concerns about Mrs May’s handling of Brexit.

News in Brief - 10/11/2017

GBP

Sterling saw some intraday volatility yesterday, ultimately closing higher against USD and lower versus the euro. Little headline data was released, and news media were focussed on domestic political turmoil and ongoing Brexit negotiations, the latest round of which will conclude this week. Divorce payments remain the main point of contention, with the EU reportedly insisting on financial agreement by the end of the month in order to progress talks to a transitional agreement. Reports have emerged this morning that Theresa May is seeking to increase the current £20bn offer, a development that could potentially prove strongly sterling positive if it leads to a breakthrough in talks.

EUR

The euro benefitted from a mild risk-off move in global markets yesterday, as the Nikkei 225 index led equities lower, implied volatility from S&P500 options spiked, and other funding or haven currencies such as CHF and JPY performed well against USD. How far the move will extend remains to be seen. Yesterday’s data included a big upgrade in the European Commission’s official economic forecasts for the eurozone. Growth is now expected to be a whopping 2.3% this year in the eurozone, and 1.9% by 2019. Helpfully, the Commission included a forecast that growth will fall to 1.5% in 2017 in the United Kingdom, and 1.1% by 2019 as Brexit uncertainty weighs on investment intentions. This morning’s data has included a strong recovery in French Industrial Production, which rose 0.6% after a 0.2% fall previously.

USD

USD performed poorly on the whole yesterday, as tax reform proposals continued to hit stumbling blocks of various shapes and sizes. The Senate revealed plans to delay cuts to corporate taxes until 2019, in a bid to mitigate the fiscal effects of the tax cut. The legislation is expected to move to the house for a vote next week. But between concerns about the fiscal impact of the tax cut, and fighting about the deductibility of state and local taxes, meaningful tax reform remains a challenging proposition for the GOP and a distant hope for dollar bulls. The US will enjoy the Thanksgiving holiday today, and no data will be released.

UK News - 10/11/2017

FT: Theresa May ready to increase £20bn Brexit divorce offer. Eurosceptics accept more money may be needed to break talks deadlock. Theresa May is ready to increase Britain’s offer to the EU over the Brexit divorce bill, after signs that the hard Eurosceptics in her party will tolerate paying more money to break the deadlock in negotiations. Mrs May has said that Britain “will honour commitments we have made during the period of our membership” and her team are working on different scenarios that would see her considerably increase the €20bn she has already put on the table. No big breakthroughs on money were made in the sixth round of Brexit talks, which conclude on Friday in Brussels.

Reuters: Britain agrees to set EU “Exit Day” in law. Britain’s government said on Thursday it would use legislation to fix the time and date of the country’s European Union exit, addressing concerns of Brexiteers who fear slow negotiations and opposition to the divorce could cause delays. The government said it was proposing a change to the EU (Withdrawal) Bill currently making its way through parliament to set the exit for 2300 GMT on March 29, 2019. “We’ve listened to members of the public and Parliament and have made this change to remove any confusion or concern about what ‘exit day’ means,” Brexit minister David Davis said in a statement. The date has previously been implied by a fixed two-year negotiating period triggered on March 29, 2017, but not explicitly stated in law.

News in Brief - 09/11/2017

GBP

Having sold off yesterday, sterling found its legs overnight and has managed to claw back some of its recent losses. Theresa May’s Government remains beleaguered, with Priti Patel, the international development secretary, resigning from the cabinet this morning following controversy over an unauthorised visit to Israel. Pressure is also mounting from Brussels, who have given a two to three week deadline for Britain to set out how much it is willing to pay as a Brexit divorce settlement. Economic data also failed to help, with the Royal Institute of Chartered Surveyors releasing its monthly survey of members opinions of their local housing markets, which showed a market fall in optimism. The net balance of surveyors reporting price increases in their areas fell to 1%, and the housing market was described as “stuttering”. Today at 13:00 GMT the National Institute for Economic and Social Research will release its latest Gross Domestic Product Growth estimate.

EUR

EURUSD traded sideways yesterday, but has seen a break above yesterday’s trading range this morning, helped along by yet another bumper surplus for the German Trade Balance. Yesterday’s paucity of headline dada continues into today, although the European Central Bank’s Economic Bulletin was released this morning. At 10:00 the latest official economic forecasts from the European Commission will be released.

USD

USD price action was deeply uninspiring against GBP and EUR yesterday, but the greenback continued its tug of war with petro and resource linked currencies yesterday, losing ground to the loonie, aussie, and kiwi. Donald Trump wrapped up his two day state visit to China with some comments on China’s trade surplus with the US, although interestingly he went as far as asking “who could blame” China for the situation, instead placing the responsibility on past US leaders for the situation. Conventional economic theory holds that it is the United States’ savings and investment levels, not Chinese or even US trade policy, that is primarily responsible for the trade balance. Today at 13:30 GMT, weekly Unemployment Claims will be released, followed at 15:00 by Wholesale Inventories.

UK News - 09/11/2017

FT: EU gives UK up to 3 weeks to make Brexit bill offer.  December summit could fall short on transition guidelines without settlement. Brussels is giving Britain two to three weeks to set out how much it is prepared to pay in the Brexit divorce settlement, warning that the EU will otherwise struggle to prepare this year for a transition deal the UK badly wants. According to the informal deadline, unless London makes a big financial offer this month, the bloc may be unable to adopt guidelines for the transition talks at a crucial summit in December. “We need to know soon,” said one senior EU negotiator. “There isn’t much time, there are no shortcuts.”

Reuters: In new test for PM May, aid minister resigns.  British aid minister Priti Patel was forced from office on Wednesday over undisclosed meetings with Israeli officials after Prime Minister Theresa May sought to reassert her diminished authority as she negotiates Brexit. Patel, a Brexit campaigner who is popular in the ruling Conservative Party, had to abandon a trip to Africa earlier on Wednesday after being summoned by May to answer questions on more unsanctioned meetings that breached diplomatic protocol. After a hastily arranged meeting not long after Patel landed in London, May’s office released her minister’s letter of resignation, in which Patel said her conduct in Israel had fallen “below the high standards” required of her post. “While my actions were meant with the best of intentions, my actions also fell below the standards of transparency and openness that I have promoted and advocated,” Patel wrote in the letter to May.

News in Brief - 08/11/2017

GBP

Sterling traded higher against USD and EUR yesterday, as political headlines dominated the news cycle and little headline UK data was released. New Car Registrations fell for the seventh consecutive month in October, registering a 12.2% year on year fall, according to the Society of Motor Manufacturers and Traders. Typically, consumers may delay big ticket purchases such as cars in a climate of economic uncertainty. Official UK Retail Sales remain in growth overall on a year on year basis, for now at least, but this morning’s data has included a surprise fall in the British Retail Consortium’s Retail Sales Monitor for October.

EUR

The euro has had an eventful start against USD this week, weakening throughout yesterday morning and afternoon before rallying in the evening – only to give up the same ground yet again this morning. Yesterday’s data included Sentix Investor Confidence, which rose sharply to 34.0, as the surveyed investors reported levels of confidence consistent with an economic boom. Producer Prices, in the meantime, rose 0.6% in September. This morning’s data has included the eurozone Retail Purchasing Managers Index, which showed a score of 51.1, slightly lower than expected. Later in the morning, hard Retail Sales figures will be released.

USD

The US dollar reached its strongest level against the euro since mid-July, while giving up ground against sterling and commodity linked currencies. Elsewhere, bond market volatility sank to record lows as markets wait for more information about the likely approach of newly nominated Fed chair Jerome Powell, and potential changes in fiscal policy due to tax reform. This afternoon at 15:00 GMT we have the Job Openings and Labour Turnover Summary. Tonight at 19:30 GMT Janet Yellen is due to deliver her first public speech since not being renominated as Fed chair.

UK News- 08/11/2017

Reuters: UK retailers suffer worst October since 2008. British retail spending fell last month at the fastest pace for any October since 2008 as consumers curbed purchases of non-food goods in the face of rising inflation, a survey showed on Tuesday. Retail sales values slid by an annual 1.0 percent on a like-for-like basis, which strips out changes in store size, the British Retail Consortium (BRC) said, compared with a 1.9 percent rise in September. Another survey from payments company Barclaycard (BARC.L) also showed weak consumer spending, with a similar split between spending on essentials at the cost of spending on discretionary items. Last week, the Bank of England raised interest rates for the first time in more than 10 years.

FT: Dublin calls for 5-year Brexit transition period.  Coveney rails against ‘game of chicken’ as Irish concerns of collateral damage mount. Ireland has called for a transition period of up to five years after the UK leaves the EU in March 2019, in a sign of Dublin’s mounting concern that it will suffer collateral damage from Brexit. Simon Coveney, Irish foreign minister, also told the Financial Times in an interview that it was “not realistic” to agree a fully fledged UK-EU free-trade deal next year, even though Theresa May, Britain’s prime minister, has set out just such a goal.

News in Brief - 07/11/2017

GBP

Sterling traded higher against USD and EUR yesterday, as political headlines dominated the news cycle and little headline UK data was released. New Car Registrations fell for the seventh consecutive month in October, registering a 12.2% year on year fall, according to the Society of Motor Manufacturers and Traders. Typically, consumers may delay big ticket purchases such as cars in a climate of economic uncertainty. Official UK Retail Sales remain in growth overall on a year on year basis, for now at least, but this morning’s data has included a surprise fall in the British Retail Consortium’s Retail Sales Monitor for October.

EUR

The euro has had an eventful start against USD this week, weakening throughout yesterday morning and afternoon before rallying in the evening – only to give up the same ground yet again this morning. Yesterday’s data included Sentix Investor Confidence, which rose sharply to 34.0, as the surveyed investors reported levels of confidence consistent with an economic boom. Producer Prices, in the meantime, rose 0.6% in September. This morning’s data has included the eurozone Retail Purchasing Managers Index, which showed a score of 51.1, slightly lower than expected. Later in the morning, hard Retail Sales figures will be released.

USD

The US dollar reached its strongest level against the euro since mid-July, while giving up ground against sterling and commodity linked currencies. Elsewhere, bond market volatility sank to record lows as markets wait for more information about the likely approach of newly nominated Fed chair Jerome Powell, and potential changes in fiscal policy due to tax reform. This afternoon at 15:00 GMT we have the Job Openings and Labour Turnover Summary. Tonight at 19:30 GMT Janet Yellen is due to deliver her first public speech since not being renominated as Fed chair.

UK News- 07/11/2017

Reuters: UK retailers suffer worst October since 2008. British retail spending fell last month at the fastest pace for any October since 2008 as consumers curbed purchases of non-food goods in the face of rising inflation, a survey showed on Tuesday. Retail sales values slid by an annual 1.0 percent on a like-for-like basis, which strips out changes in store size, the British Retail Consortium (BRC) said, compared with a 1.9 percent rise in September. Another survey from payments company Barclaycard (BARC.L) also showed weak consumer spending, with a similar split between spending on essentials at the cost of spending on discretionary items. Last week, the Bank of England raised interest rates for the first time in more than 10 years.

FT: Dublin calls for 5-year Brexit transition period.  Coveney rails against ‘game of chicken’ as Irish concerns of collateral damage mount. Ireland has called for a transition period of up to five years after the UK leaves the EU in March 2019, in a sign of Dublin’s mounting concern that it will suffer collateral damage from Brexit. Simon Coveney, Irish foreign minister, also told the Financial Times in an interview that it was “not realistic” to agree a fully fledged UK-EU free-trade deal next year, even though Theresa May, Britain’s prime minister, has set out just such a goal.

News in Brief - 06/11/2017

GBP

Sterling had a relatively quiet day on Friday, failing to recover any significant portion of its losses incurred after last Thursday’s Bank of England interest rate announcement. The weekend’s political headlines included more scandal for the Conservative Party, and a fresh batch of document leaks on offshore tax structures, though nothing that’s liable to directly affect the value of the pound for now. This will be a somewhat slow week for sterling data, beginning with the British Retail Consortium’s Retail Sales Monitor in the early hours of tomorrow morning. Later in the week, Industrial and Construction Output data will be released on Friday.

EUR

EUR nudged down slightly on Friday on the back of a rather empty economic calendar. The ex-Catalan leader Carles Puigdemont turned himself in with the police in Brussels yesterday, only to be released later, as Spain’s constitutional crisis continues. This has already been a busy morning for the euro data calendar, with Services Purchasing Managers Indices across the eurozone printing slightly lower than expected in many instances, although the overall Eurozone Composite PMI beat expectations to rise slightly to 56.0. Sentix Investor Confidence will be released this morning at 10:30 GMT, followed by the Producer Price Index at 11:00 BST.

USD

USD has had an uneventful start to the week, with the weighted DXY index trading flat since midnight. Friday’s Non-Farm Payrolls report showed the economy adding less jobs last month than expected by forecasters, while wages were flat on the month. The unemployment rate did fall to just 4.1% however, although the lack of dramatic market reaction to the report illustrates the reduced importance of the report for USD at present, due to the tight labour market. Donald Trump’s state tour of Asia will continue this week, after a round of golf and a fist bump with Japanese Prime Minister Shinzo Abe – and some comments overnight criticising Japan’s trade policies that sent JPY to its lowest level against USD since March. New York Fed Chair Bill Dudley will speak today at 18:10 GMT.

UK News- 06/11/2017

FT: Oil price hits 2-year high as Saudi Arabia targets elite Crude rises after crown prince crackdown leads to arrests of royals, ministers and tycoons. Oil hit a fresh two-year high on Monday after the weekend arrests of at least 11 Saudi Arabian princes and dozens of senior officials and prominent businessmen by the country’s new anti-corruption commission. Brent crude was up 0.8 per cent at $62.55 a barrel on Monday – its highest level since July 2015 – as uncertainty over the situation in Riyadh added to other factors putting upward pressure on oil prices.

FT: Huge leak of documents reveals Queen’s offshore investments Wilbur Ross and Lord Ashcroft also feature in ‘Paradise Papers’. A huge leak of financial documents has revealed the offshore interests of hundreds of high-profile companies and individuals, including millions of pounds invested by the Queen’s private estate in a Cayman Islands fund. The revelations are the result of lengthy investigations by journalists across the world, who have examined 13.4m files belonging to professional services firms and offshore corporate registries. The BBC said there was nothing illegal in the investments and no suggestion that the Queen was not paying tax. But it said questions might be asked about whether the monarch should be investing offshore.

News in Brief - 03/11/2017

GBP

In spite of market speculation that the Bank of England would use its interest rate decision yesterday, and accompanying Inflation Report and Press Conference, to paint a bullish picture of the UK economy- in a bid to talk the pound up and stave off the inflationary effects of the weak pound on the UK economy- the reality proved very different. Upon release of the rate decision, inflation report, and meeting minutes, it became clear that the voting members from the Bank remain cautious about the economy’s growth prospects, and sterling immediately sold-off. BoE Governor Mark Carney’s press conference saw further losses, as he emphasised that the Bank would prefer to undershoot interest rate hikes, and potentially have to deal with the economy starting to overheat, rather than risking choking economic growth. Indeed, the Bank’s official forecast only see two more hikes in the next three years. Aside from this, yesterday also saw the release of the Construction Purchasing Managers Index, which showed a mild recovery from last month’s index, although optimism about future business remained dismal. This morning, Services PMI rose to 55.6, reflecting a decent rate of expansion in the sector and an improvement from August’s figures.

EUR

The euro closed marginally higher against the US dollar, and like all major currencies much higher against sterling . Political tensions in Spain remained elevated, as eight members of the Catalan government were taken into custody by the orders of the Spanish court of justice for their collaboration in organising the referendum that later led to the declaration of independence of the Catalan region. Spain issued a European arrest warrant for the Catalan leader Catalan Puidgemont as well, who is currently in Brussels and rumoured to be considering an asylum claim.

USD

The US dollar experienced a rather choppy session as markets tried to decide what to make of the details of the tax bill, released by the Republican party after much political wrangling. On the whole market participants appear to have been far from overwhelmed by the bill and it’s prospects for passage. The other big news coming from the US was the nomination of Jerome Powell by president Trump for the position of Fed chair. He is seen as the status quo candidate that will be much alike his predecessor Janet Yellen, who was perceived to be a cautious dove. This afternoon at 12:30 BST we will see the release of monthly Non-Farm payrolls and the change in Average Hourly Earnings, followed by the non-Manufacturing Purchasing Managers Index at 14:00.

UK News- 03/11/2017

FT: BoE’s Broadbent emphasises need for further rate rises. Ben Broadbent, deputy governor of the Bank of England, sought to reinforce the central bank’s message that it had not gone soft on future rate rises on Friday, saying “we will need a couple more interest rate rises”. Speaking on the BBC Today programme, the deputy governor fought against the financial markets’ impression that Thursday’s rate rise was “dovish”. Sterling fell more than 1 per cent against the dollar and the euro after the decision, when the BoE dropped its previous reference to markets underestimating the need for further interest rate rises. But officials in the central bank, both publicly and privately, said there had been no change in view and the reason that language was not needed was because the financial markets had taken notice of the BoE’s previous comments and finally priced in future interest rate rises.

Reuters: UK services sector grows at fastest rate in six months – IHS Markit/CIPS Britain’s services sector enjoyed a sharp pick-up in growth last month but companies were nervous about Brexit, a closely watched survey showed on Friday, a day after the Bank of England raised interest rates for the first time in a decade. The IHS Markit/CIPS services purchasing managers’ index (PMI) jumped to 55.6 in October from 53.6 in September, its highest level since April and its biggest one-month rise since. August 2016. The reading exceeded all forecasts in a Reuters poll and moved further above the 50 mark that separates growth from contraction. The services survey follows relatively upbeat PMI readings for the smaller manufacturing and construction sectors in October, and taken together they suggest the economy is growing at a quarterly rate of 0.5 percent, IHS Markit said.

News in Brief - 02/11/2017

GBP

Sterling volatility was low yesterday as markets braced for today’s all important Bank of England events. The Markit Manufacturing Purchasing Managers’ Index rose slightly in October, as the surveyed manufacturers reported higher activity and robust order growth. This morning, at 9:30am GMT we see the release of Construction data, however the markets main focus will be the Bank of England’s latest Inflation Report at 12:30pm GMT, alongside a rate decision that is likely to be the first hike in more than a decade. Expectations for the move are overwhelming after months of increasingly explicit messaging from Monetary Policy Committee members, and so the sterling reaction is likely to be driven by how hawkish or dovish the messaging accompanying the hike will be. MPC members including Governor Mark Carney will give a press conference at 13:30.

EUR

The euro traded lower against USD yesterday, but recovered its losses with some sharp appreciation versus the greenback overnight. After a lull yesterday the euro data calendar gets more eventful today. Eurozone Manufacturing PMIs have already been released this morning, with Italian, Spanish and German figures all positive, but French manufacturing below market expectations. The overall reading for the Eurozone was 58.5, with any number above 50.0 representing expansion.

USD

Sold off overnight as firm reports emerged that US President Donald Trump would choose Jerome Powell as the next Federal Reserve Chair, and the Fed itself held rates steady as universally expected at last night’s meeting. Powell is a conventional choice, and already a member of the Fed’s Board of Governors that is perceived as in favour of lighter regulation. Last night’s dollar weakness may have been triggered by an unwinding of expectations that a hawkish or unconventional pick may disrupt the Fed’s current, extremely cautious approach to rate hikes. Political wrangling continued in the legislature over a Republican Party plan for tax cuts, that will supposedly be released today and may be relevant for USD if it is viewed as inflationary. Aside from the potential announcement of tax reform plans. Weekly Unemployment Claims data will be released today at 12:30 GMT, alongside Nonfarm Productivity and Labour Costs data. Fortuitously, Jerome Powell himself will speak at 12:30.

UK News- 02/11/2017

FT: Trump set to name Powell as Fed chair nominee. President expected to make announcement on Thursday confirming choice of central bank head. Jay Powell is expected to be the president’s nominee to serve as the next chair of the Federal Reserve, according to two White House officials, as Donald Trump moves to make his mark on the world’s most powerful central bank. The White House is due to make the announcement on Thursday, ending months of speculation ahead of the end of Janet Yellen’s first term as chair in February. The post of Fed chair is subject to Senate confirmation. Mr Powell has been a serving Fed governor since 2012. A centrist on monetary policy, he is known as a pragmatic and down-to-earth official with private sector and government experience. A trained lawyer and former partner at private equity firm Carlyle, he also served in the Treasury under former president George H.W. Bush in the 1990s.

Reuters: Bank of England set to raise rates for first time since 2007. The Bank of England looks set to raise interest rates for the first time in more than 10 years on Thursday, despite economic growth appearing weaker than before any other increase in borrowing costs in the past 20 years. Almost all economists polled by Reuters expect the BoE to raise base rates to the 0.5 percent they stood at from March 2009 until August last year, when they were halved to 0.25 percent after Britons voted to leave the European Union. Britain’s annual growth is running at its weakest in four years, but with inflation hitting a five-year high of 3.0 percent in September and unemployment at a 42-year low, the central bank is worried the economy could overheat. “The time for beginning to edge up interest rates oh-so-cautiously from a quarter percent to a half percent is pretty nigh,” former BoE deputy governor Rachel Lomax said.

News in Brief - 01/11/2017

GBP

Plenty of political headlines dominated UK news yesterday, but the most significant for sterling was the news that lead EU Brexit Negotiator Michel Barnier was ready to speed up negotiations. Sterling crosses popped higher on the news, which arrived after midday, and extended their gains through the afternoon. The week’s key event remains tomorrow’s Bank of England meeting, and yesterday’s only major release was GfK consumer confidence, which remained negative overall. Today’s main data release will be the Manufacturing Purchasing Managers’ Index at 09:30 GMT, but with tomorrows potentially historic rate announcement looming the release may have a muted impact on sterling.

EUR

The euro had an uneventful day against USD, and weakened further to sterling. The morning’s data releases were a mixed bag, with eurozone Gross Domestic Product growth beating expectations for the second quarter, printing at 0.6%. Estimates of Q1 growth were also revised upwards, to 0.7%. The results underlined the impressive improvement in eurozone economic conditions this year, but inflation data released yesterday showed the lack of effect the growth increase has had in inflation. The Core Consumer Price Index rose just 0.9% year on year, a result typical of the last three years or so, and less than expected. No headline euro data will be released today, with many important economies enjoying All Saints day holidays.

USD

USD traded sideways in a broad sense yesterday, trading weaker against GBP and giving up early gains versus the euro. There were no developments in the week’s two headline political stories of the ongoing probe into the Trump administration’s potential involvement with foreign interference in last year’s elections, and the announcement of the next Federal Reserve Chair. The afternoon’s data included strong prints for the Chicago Purchasing Managers Index, a manufacturing output survey, and the CB Consumer Confidence Index, which spiked sharply in October. Today at 13:15 GMT ADP will release its monthly estimate of Non-Farm payrolls, followed at 15:00 by ISM Manufacturing PMI and Construction Spending. Total Vehicle Sales will also be released throughout the day, providing a partial but timely look at the health of consumer spending. At 19:00 GMT the Federal Reserve’s latest rate decision will be announced, although without a press conference to explain a potential rate hike, the Fed is likely to hold on rates tonight.

UK News- 01/11/2017

FT: US monetary tightening set to endure after Yellen. Fed chair will pass on most benign economic outlook America has seen for a decade. Janet Yellen will on Wednesday chair what may be one of her final meetings at the helm of the US Federal Reserve as the spotlight falls on whether monetary policy will shift after her expected departure. President Donald Trump is expected to nominate a replacement for Ms Yellen this week but the central bank’s slow but determined course towards tighter monetary policy seems set to endure, as Jay Powell, her most likely successor, inherits an established strategy and strengthening recovery. The next Fed chair will nevertheless be forced to face some significant decisions soon after taking the helm, including deciding how to combat the next economic downturn at a time of intense hostility among congressional Republicans to many of its stimulus tools.

Reuters: NIESR expects BoE rates to peak at 2 percent in 2021. Britain’s National Institute of Economic and Social Research said it expects the Bank of England to start a sustained rate-tightening cycle on Thursday, which will lead to interest rates peaking at 2 percent in 2021. NIESR’s forecast is more hawkish than almost all the economists polled by Reuters last week, and comes a day before economists expect the BoE to raise interest rates for the first time in more than a decade. Three months ago, NIESR brought forward its expectation for a first BoE rate rise to February 2018, at a time when most economists still expected the BoE to wait until 2019 before beginning to raise rates. In September the BoE surprised markets by saying most of its policymakers expected to back a rate rise “over the coming months”. BoE Governor Mark Carney said this largely reflected a weaker outlook for productivity – which has stagnated in Britain since the financial crisis and reduced the rate at which Britain’s economy can grow without creating excessive inflation.

 
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