Morning Report: 20 January 2017

GBP Ongoing political headlines about Prime Minister Theresa May's speech at Davos, and various European and British politicians' responses to May's landmark speech earlier this week, were the focus of news wires yesterday, with sterling continuing to reclaim gains that had initially been made earlier this week. Sterling has been helped by May striking a more conciliatory tone on the financial services sector at Davos, acknowledging its importance to the economy in an interview with Bloomberg. There was also an upbeat tone from HSBC's CEO Stuart Gulliver, who, despite confirming that around 20% of the firms revenue generating operations would likely move to France as a direct result of Brexit, stated his belief that the 'revenue impact of Brexit will on financial services will be made good in two or three years' time'. Today at 09:30 GMT Retail Sales will be released, rounding off a busy week of sterling data releases.

EUR At first it seemed that the euro was showing the famed 'Draghi effect', and selling off in the wake of the the European Central Bank President's press conference. But the effect was short lived, and the single currency quickly bounced back in the evening. As expected, the ECB kept rates unchanged at yesterday's meeting, and Mario Draghi called for patience from German savers, who are now seeing higher inflation of 1.7% year on year. Draghi said that the increase in inflation was driven by a relatively transitory increase in energy prices, and that the ECB would continue very accommodative monetary policy until inflation was broad based and sustainable across the eurozone. This morning's only major release has been the German Producer Price Index, which rose 0.4% in December.

USD The greenback once again found itself on the back foot yesterday despite some strong data, most notably some strong reads on the Philadelphia Fed Manufacturing Index, and an extraordinarily low number of initial jobless claims. Incoming Treasury Secretary Steve Mnuchin also sparred with lawmakers on various topics, and actually expressed support for a strong US dollar, placing him potentially at odds with statements made by Donald Trump. But today is a new day, and one event on the US calendar has the potential to reignite the US dollar strength seen in late 2016: the inauguration of Donald Trump as President of the United States. Trump's inauguration speech, expected some time after his swearing in at 5pm GMT, may see the President offer more detail on fiscal plans, especially infrastructure spending and taxation, an incredibly relevant development for USD, in addition to trade policy. When Barack Obama was sworn in eight years ago, USD strengthened by more than 4% in a day- markets are unlikely to welcome today's event with such enthusiasm, however.

CAD CAD remained on the defensive yesterday against USD, but the pace of its losses slowed somewhat. The Canadian Survey of Manufacturing showed Manufacturing Sales up 1.5% in November, but this did little to support the loonie after Bank of Canada Governor Stephen Poloz's comments on Wednesday about rate cuts still being a possibility. Today at 13:30 GMT the latest Consumer Price Index data will be released alongside Retail Sales.

UK News

Reuters. Scotland will vote for independence in two years - Salmond. Scotland will vote to become independent within two years due to the hardline position being taken by British Prime Minister Theresa May over Brexit, former Scottish first minister Alex Salmond said on Friday.

Reuters. Illness forces Northern Ireland's McGuinness to quit politics. Sinn Fein's Martin McGuinness, a key figure throughout five decades of conflict and peace in Northern Ireland, said on Thursday he was bowing out of politics and would not lead his nationalist party into elections in March.

Guardian. Nurse shifts left unfilled at nearly every hospital in England, figures show. Almost every hospital in England has fewer nurses on duty than each believes are needed to guarantee safe patient care, research shows. Analysis of official data by the Health Service Journal (HSJ) found that 96% of NHS hospital trusts in England had fewer nurses covering day shifts in October than they had planned and 85% did not have the desired number working at night.