Back to school for bad Boris
The unanimous ruling of the UK Supreme Court was prorogation of parliament was unlawful and the move was void. Commons Speaker John Bercow was conveniently on hand to state that parliamentary business would resume on Wednesday 25th September. Markets perceived a decreased chance of a ‘no-deal’ EU departure on October 31st which pushed Sterling higher, although uncertainty and tension also increased triggering a decrease in volatility. Markets will be closely watching the next political moves for trading impetus.
EU Chief negotiator Michel Barnier reiterated that he wasn’t optimistic that the UK would conjure a solution to the backstop. CBI UK industrial output was unchanged in the three months to September, incoming orders fell to -28 from -13 last month, export orders deteriorated further and companies were less confident in the outlook. Sterling was unable to break the 1.2500 mark on the Dollar and retreated to 1.2460 this morning and the Euro opens at 1.1340. Parliament resumes at 11.30am and further choppy trading is inevitable.
The greenback is holding onto recent gains against a basket of major currencies buoyed by reports of improving trade relations between the US and China. More US soybeans shipments towards mainland China are seen as positive outcomes following recent deputy-level negotiations.
The US Philly Federal Reserve (Fed) non-manufacturing index strengthened to 9.5 for September from 7.5 previously with solid growth in new orders, but unfilled orders declined. There was solid growth in employment and upward pressure on wages, while pricing pressures were little changed from August. Companies were more optimistic over the six-month outlook. Consumer confidence declined to 125.1 for September from a revised 134.2 previously and well below consensus forecasts with a dip in current conditions and a sharp decline in the expectations index as confidence in the labour market declined. The Richmond Fed manufacturing index dipped to -9 for September from -1 previously with order backlogs declining for the third successive month.
The data overall dampened confidence in the US outlook which hampered the dollar, especially given the importance of consumer spending.
The Euro has fallen back below the 1.10 mark against the Dollar as the European session begins but could still suffer deeper losses on dovish ECB speak.
Incoming European Central Bank President Christine Lagarde offered a clear sign that she’s ready to follow Mario Draghi’s path and keep monetary policy ultra loose to lift Euro-area inflation. In her first comprehensive comments on monetary policy since winning the job, she stated the ECB has the tools to tackle a downturn and must be ready to use them if needed.
Data wise, The German IFO business confidence index improved slightly to 94.6 for September from 94.3 the previous month with a dip in the expectations component offset by an improvement in the current assessment. According to the IFO, the economy is liable to shrink in the third quarter and stagnation was likely for the fourth quarter with the downturn only taking a breather.
Data to watch
13.00 USD – FOMC Member Evans Speaks
15.00 USD – FOMC Member George Speaks
15.30 USD – Crude Oil Inventories