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Jan 19, 2018

MAIN POINTS OF TODAY

 MAIN POINTS OF TODAY

US Government threatened with possible shutdown again  
  • The deadline for the US Congress to pass a bridging bill to fund the government until the 16th of February ends tonight.
  • In the house of Representatives, in a display of strength the conservatives past the bill with their own votes, however the Senate may be a different story altogether. There is a mixture of Democrats and Republicans that oppose the bill for different reasons.
  • Democrats have been demanding protection from deportation for young immigrants known in the US as “Dreamers”.
  • Republicans in response, inserted a long term provision for the Children's Health Insurance Program to lure Democrats.
  • However the voting of the bill hangs in the balance and should it not pass, partial government paralysis is imminent.
  • U.S. Government Agencies have already started warning employees for a government shut down, magnifying the effect.
  • We consider that should the bill not pass, the US Dollar could be weakened and may open with a negative gap on Monday.
  • Also, it should be noted that passing of consecutive monthly bridging funding bills instead of a yearly budget, could be increasing instability and hence weakening the US Dollar in the long run.
Soft Brexit optimism for the GBP
  • Media reports suggested the French Prime minister stated that should the UK want to have a single market in finance, it will have to pay for it and accept EU courts jurisdiction.
  • The offer is considered as beyond Theresa May’s red lines.
  • Media reports also suggested that France may be showing it’s hardest bargaining line, in fear of future Brexit followers.
  • On the other hand, there seems to be increased optimism as analysts point out that the Brexit Bill of 40 billion GBP could be covered by a number of advantages, even at a future “Canada style” relationship between the EU and UK which is considered as the weakest soft Brexit deal.
  • We see the case, for the worries stemming from Macron’s statements to be subdued and that the Soft Brexit optimism will continue to support GBP at least in the short term.
Today’s other highlights:
  • Eurozone: German PPI for December Survey: +0.2%mom Prior: +0.1%mom, 07:00(GMT)
  • Switzerland: PPI for December Survey: N/A Prior: +0.6%mom, 08:15(GMT)
  • UK: Retail sales Survey: -0.6%mom Prior :+1.1% mom 09:30(GMT)
  • Speakers: Boston Fed President Raphael Bostic and San Francisco Fed President John Williams speak

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