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News in Brief - 20/09/2017

GBP

Monex  
 

Sterling had a quiet day yesterday, trading in a particularly tight range against USD and drifting only slightly lower against the euro. Today is likely to be significantly more eventful, with critical data releases, domestic politics, and a US central bank meeting all on the calendar. This morning’s Retail Sales release is extremely important due to the confidence shown by the Bank of England in assessing the current state of consumption at last week’s Monetary Policy Committee. The MPC was confident enough in consumer spending to signal rate hikes in the near future, but the proof is in the pudding and a miss for this morning’s release at 09:30 BST has the potential to be disruptive for sterling.

EUR

The euro once again strengthened against USD yesterday, pushing EURUSD back up towards the three year highs seen in recent weeks. The widely followed ZEW survey was released, with the crucial German Economic Sentiment indicator rising sharply to 17.0, an improvement from last month’s level but below the long term average of 23.8. The improvement in business sentiment is notable due to the looming German election – normally a source of uncertainty. The eurozone index also rose, although by slightly less than expected. This morning’s data has included the German Producer Price Index, which rose a healthy 0.2% in August.

USD

USD drifted lower on a broad basis yesterday, extending its losses overnight, ahead of tonight’s Federal Open Market Committee releases. Donald Trump’s speech at the United Nations in New York dominated the headlines yesterday, and although there was plenty of the punchy rhetoric we’ve come to expect from the US President, the speech itself stuck fairly close to traditional US foreign policy. Trump spoke in favour of the UN’s goals and urged reform, while advocating for a rules based international order, and calling out international enemies of the United States such as North Korea and Iran. Tonight at 19:00 BST, the FOMC’s latest rate decision will be released, along with updated economic projections. Market expectations of Fed policy have fallen to rock bottom, and so the bar for a hawkish surprise seems set exceptionally low. Details are expected today about how and when the Fed will begin to reduce the size of its balance sheet, which has been inflated by years of quantitative easing, and so the Press Conference given by Janet Yellen at 19:30 BST will be an opportunity for further market relevant information to come out.

 
 
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UK News- 20/09/2017

FT: Theresa May prepares €20bn EU budget offer Florence speech set to see attempt to tackle European demands on Brexit divorce bill. Germany’s Angela Merkel has been told by the British government to expect Theresa May this week to offer to fill a post-Brexit EU budget hole of at least €20bn, the first attempt by London to meet European demands to settle its divorce bill. Olly Robbins, the prime minister’s top EU adviser, has contacted his counterparts in several European capitals to reassure them Mrs May’s Friday speech in Florence would include the financial offer, according to officials briefed on the discussions.

Reuters: UK employers’ optimism falls to lowest since Brexit vote British employers are their most pessimistic about the outlook for the economy since last year’s Brexit vote and want clarity about the departure from the European Union, a survey showed on Wednesday. However confidence in hiring and investment remained stable this month, the survey by the Recruitment & Employment Confederation, representing recruitment firms, showed. “The political climate isn’t helping the situation. Businesses need clarity in order to plan effectively, and so far the Brexit negotiations have not resolved any of the core issues,” REC chief executive Kevin Green said.

News in Brief - 19/09/2017

GBP

Sterling pared back some of its recent progress against the US dollar yesterday, as Mark Carney added a spot of finesse – or ambiguity – to last week’s hawkish central bank rhetoric. The Bank of England Governor maintained the general tone of last week’s hawkish Monetary Policy Committee Minutes and subsequent speeches, including perennial statements about limited and gradual rate hikes, but added that in a situation of rising global interest rates, the BoE would have to raise rates in order to be maintaining the same degree of accommodation. The statement muddies the water slightly for sterling bulls, and some profit taking was seen late in the session following Carney’s speech. Elsewhere, the UK’s governmental politics remained in a state of farce, with various branches of the executive jockeying for position and public attention over Brexit, to little discernible currency effect.

EUR

The euro traded sideways yesterday, but has strengthened substantially overnight. Yesterday’s headline data was limited to an on-expectations print for eurozone Consumer Price Index inflation. This morning’s data has included the eurozone’s Current Account, which showed a slight increase, although nothing major. Today at 10:00 BST the widely followed ZEW survey will be released, with most analysts expecting an improvement in the widely followed German index.

USD

USD made inroads versus sterling yesterday, but has taken a major hit against the euro overnight. Yesterday’s data included a softer than expected print for the NAHB Housing Market Index. This afternoon, at 13:30 BST, more substantial housing market data will be released in the form of Building Permits, Housing Starts, alongside Import Prices and the Current Account. Donald Trump continued his extended programme of walking back campaign positions yesterday, giving a reasonably conventional speech to the United Nations in New York, saying the organisation has “truly noble goals”, but needed reform. The speech marks a noticeably more positive approach to the United Nations than previous statements, which in the past have included criticism of “cheap 12 inch sq. marble tiles” at the organisation’s headquarters in New York.

UK News- 19/09/2017

FT: Theresa May moves to tighten grip on Brexit process. Prime minister shakes up negotiating team and rebuffs Johnson intervention. Theresa May has moved to tighten her grip on the UK’s disjointed Brexit operation, shaking up her negotiating team and dismissing efforts by her foreign secretary, Boris Johnson, to push her towards a hard exit. Mrs May seized full control of Brexit talks by making Olly Robbins, previously head of the department run by her chief Brexit negotiator David Davis, answerable only to her and belittled Mr Johnson’s weekend treatise advocating a swifter, cleaner break from the EU. “This government is being run from the front and we all have the same destination in our sights,” Mrs May said at a news conference with her Canadian counterpart, Justin Trudeau, in Ottawa.

Reuters: Bank of England’s Carney sees Brexit pushing up inflation, slowing growth. Bank of England Governor Mark Carney said on Monday that Brexit is likely to hurt Britain’s growth prospects in the short term and push up inflation as the country adjusts to life outside the European Union. In the short term, the weakening of trade ties with its EU partners would not be offset by new agreements with other countries, he said, as he repeated his argument from last week that interest rates would probably need to rise soon. “This makes Brexit, relative to the experience of the past half century, unique,” Carney said in a speech at the International Monetary Fund’s Washington headquarters. “It will be, at least for a period of time, an example of de-globalisation, not globalisation.”

 
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