Newsletter – 6th December 2018

Morning Bulletin

Yesterday

  • The Canadian Dollar was one of the worst performers in FX space yesterday following the Bank of Canada’s monetary policy meeting. Interest rates were held at 1.75% as widely expected, however the BOC signalled that future rate hikes could be at a more gradual pace as ‘there may be additional room for non-inflationary growth’. The BOC has raised rates 5 times since July 2017.
  • There was a disappointing UK Services PMI print released yesterday morning, with the Services sector just about in expansionary territory during November. The reading of 50.4 was the lowest in nearly two and a half years for the UK’s largest sector and was largely impacted by slowing consumer spending and Brexit uncertainty according to the survey.
  • Despite the weak data the Pound was one of the best performers in FX space yesterday morning, seemingly buoyed by news from the European Court of Justice who said the UK could still reverse Article 50 providing there was agreement from all other 27 European Leaders.
  • Leading on from the previous bullet point, Investment Bank JP Morgan now believe there is a 40% chance the UK will remain in the European Union. They previously had the odds at 20%, but that statement from the ECJ has changed things considerably. The Bank however have upped the odds of a no-deal Brexit to 20% from 10%.
  • Staying on Brexit for one final point, there was a fascinating insight into the British public’s thinking released by ComRes yesterday, which basically reveals there is no majority for any outcome currently being talked about:
    • Oppose May’s deal by 42-26
    • Oppose No Deal by 41-34
    • Oppose remaining in EU by 45-44
    • Oppose 2nd referendum by 50-40
    • Oppose extending date when UK leaves EU by 46-34
    • Support renegotiating with EU if May deal fails by 45-25
  • Eurozone Retail Sales m/m 0.3% (0.2% Exp)
  • Eurozone Final Services PMI 53.4 (53.1 Exp)
Overnight

  • According to the US Fed’s Beige Book (Analysis used ahead of next FOMC meeting) the central bank said the US economy was growing in the fall but that it does have concerns about higher tariffs due to trade wars, rising interest rates and tight labour markets. On tariffs, the report highlighted that Trump’s aggressive approach is causing: costs to increase for manufacturers, declining sales for companies and farmers hurt by retaliatory measures by China and other nations.
  • The CBI has said the UK would struggle to achieve even modest economic growth in 2019 if the UK Government fails to secure an orderly Brexit in March. The CBI currently forecasts growth of 1.4% next year for the UK economy but said a no-deal scenario would blow these figures out of the water.
  • Australia Retail Sales m/m 0.3% as expected
  • Australia Trade Balance 2.32Bn (3.10Bn Exp)
  • German Factory Orders m/m +0.3% (-0.4% Exp)
Today
  • Raft of data out of North America this afternoon, including Canadian Trade Balance, US ADP Non-Farm employment change and ISM Non-Manufacturing PMI.

 

Currency Pair Interbank Rate % Change on Day
GBP/EUR 1.1221 -0.02
GBP/USD 1.2722 -0.08
EUR/USD 1.1335 -0.08
AUD/USD 0.7220 -0.66

 

Time (GMT) Region Data Release Forecast Previous
10.00 GBP BOE Member Ramsden Speaks
12.30 USD Challenger Job Cuts y/y 153.6%
13.15 USD ADP Non-Farm Employment Change 196K 227K
13.30 CAD Trade Balance -0.7Bn -0.4Bn
13.30 USD Trade Balance -55.2Bn -54.0Bn
13.30 USD Unemployment Claims 226K 234K
13.35 CAD BOC Gov Poloz Speaks
14.45 USD Final Services PMI 54.4 54.4
15.00 USD ISM Non-Manufacturing PMI 59.2 60.3
15.00 USD Factory Orders m/m -1.9% 0.7%
17.15 USD Fed Member Bostic Speaks