Newsletter – 17th May 2017

Morning Bulletin

Yesterday

  • The Euro was one of the big gainers in yesterday’s trading. The single currency hit a 6 month high of 1.1088 against the US Dollar, whilst GBP/EUR pushed to a fresh 7 week low of 1.1630.
  • Despite a lack of any high impact Eurozone data, the single currency appeared to be buoyed by rhetoric of closer integration between France and Germany. This following the new French President Macron’s first visit to see German Chancellor Angela Merkel on Sunday.
  • There was a raft of UK inflation measures released yesterday morning all of which indicated prices had continued to rise. The headline figure was of course CPI y/y which showed annual inflation had risen to 2.7%, which was slightly higher than the expected 2.6%.
  • Typically rising inflation would result in a strengthening of the domestic currency; however we are currently in a climate where the Bank of England has almost entirely attributed inflationary pressures to the post-referendum decline in Sterling, and so this higher inflation alone is less likely to force the BOE into hiking interest rates.
  • The Pound was also under pressure yesterday as the ECJ gave its verdict that all EU member states must be given power to sign off on a trade deal with Singapore, which will undoubtedly have an impact and potentially complicate any post-Brexit trade deal with the UK.
  • There was a raft of US data releases in the afternoon and they proved mixed:
    • Building Permits 1.23M (1.27M Exp)
    • Housing Starts 1.17M (1.26M Exp)
    • Capacity Utilization Rate 76.7% (76.3% Exp)
    • Industrial Production m/m 1.0% (0.4% Exp)
  • The US Dollar had already been under pressure for most of the day following reports that President Trump had leaked confidential Intel on ISIS to Russia, and these figures did little to reinforce the faltering Dollar. In fact the US Dollar Index has now dropped to its lowest level since Donald Trump won the US Presidential election back in November 2016.
Overnight

  • EUR/USD has hit another fresh high this morning, briefly trading above the 1.1100 handle, as a leaked memo from ex FBI Director James Comey revealed that President Trump asked Comey and the FBI to drop their investigation into Trump’s former national security adviser Michael Flynn.
  • New Zealand PPI Input q/q 0.8% (0.7% Exp)
  • Australia Wage Price Index q/q 0.5% (0.5% Exp)
  • Japan Revised Industrial Production m/m -1.9% (-2.1% Exp)
Today
  • Key this morning will be a raft of UK employment data due at 9.30am, including average earnings, claimant count change and official unemployment rate.
  • Average earnings will be closely scrutinised, a disappointing figure could reinforce signs of an economic slowdown in the UK.

 

Currency Pair Interbank Rate % Change on Day
GBP/EUR 1.1640 -0.13
GBP/USD 1.2910 -0.06
EUR/USD 1.1090 +0.08
AUD/USD 0.7404 -0.30

 

Time (GMT) Region Data Release Forecast Previous
09.00 EUR Italian Trade Balance 1.97Bn 1.88Bn
09.30 GBP Average Earnings Index 3m/y 2.4% 2.3%
09.30 GBP Claimant Count Change 25.5K
09.30 GBP Unemployment Rate 4.7% 4.7%
10.00 EUR Eurozone Final CPI y/y 1.9% 1.9%
13.30 CAD Manufacturing Sales m/m 1.1% -0.2%