Good morning,

GBP: Committees and Credit

A parliamentary row is set to erupt today with the Labour party set to ask the Speaker of the House of Commons as to whether Minister for Leaving the EU David Davis is in contempt of Parliament by handing over already-redacted sector-by-sector Brexit economic impact assessments to the Brexit Select Committee. Previously Davis had said that the government was “in the midst of carrying out about 57 sets of analyses, each of which has implications for individual parts of 85% of the economy. Some of those are still to be concluded.”

Today’s pound news will likely come from the publication of the latest consumer credit figures. Consumer credit is the lifeblood of the retail sales picture in the UK but recent events may have shifted just how much life can go on the plastic. The Bank of England raising interest rates earlier this month has knocked consumer confidence in the past month and while Black Friday and Cyber Monday sales are ongoing we have to think that a lot will be paid for on credit given the real wage picture.

As we saw last week, the UK economy owes everything to the overstretched consumer. GDP grew by 0.4% in Q3 according to the latest figures with all of that growth coming from consumer spending. A weak consumer is a weak UK.

USD: Trump goes to the Senate

The USD fell to a two month low yesterday as the tax plan continued to weigh, although the greenback has rallied overnight. Donald Trump is scheduled to meet Senate Republicans to discuss plans to pass the proposed tax legislation today and this week will see the Senate debate and vote on them.

There is more potential downside for the USD from a disappointment than there is upside from the passage of the plan given a) we know most of the details around where the tax cuts will fall and b) we expect a significant amount of pressures on the US deficit as a result.

Upside risk to the USD will come from any news that suggests that Republican Senators who have expressed displeasure around certain threads of the plan are acquiescing. Measures to tie any tax cuts to an automatic cut to the Obamacare program has solidified opposition to Trump’s plans in recent weeks. Trump will meet with all Republican Senators tomorrow and I’m sure his legendary powers of negotiation will bring about a resolution.

EUR: Ireland takes euro off the highs

The euro has slipped back from its recent high without the need for an ECB story on QE to help it on its way. The likelihood of fresh elections in Ireland has been the catalyst for this with an announcement on whether the PM will fire his Deputy due in the coming few weeks.

The rest of the week is light on euro news, and as such we will wait to see how much pressure can be applied to the USD. Targets of that 3 year high of 1.2092 could be in sight. GBPEUR is holding a 50 pip range between 1.12 and 1.1150 for now.

Have a great day