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Boris bounce flattened by Hard Brexit fears

Boris bounce flattened by Hard Brexit fears


UK unemployment figures remained 3.8% in the Quarter ending in October, beating a forecast of 3.9% and employment growth hit 24,000, also beating the forecast. Headline average earnings growth for November slowed to 3.2%, down from October’s upwardly revised 3.7%. Average earnings excluding bonuses increase by 3.5%, just above the forecast. CBI Industrial Trends Orders data deteriorated further with -28 for December, down from November’s -26, which stokes concerns for the manufacturing outlook. 

The Pound remained under pressure throughout the day on fears of a ‘no-deal’ Brexit, the Boris Election Bounce having been erased completely. The government plans to prevent any extension of the transition period with legislation, and given the short amount of time to conclude fears returned that the UK could be left with no trading relationship with the EU at the end of 2020. Sterling suffered sustained selling, declining sharply below 1.3100 on the Dollar and the Euro pushed below 1.1765. Overnight, Standards and Poors amended the UK credit rating outlook to stable from negative, but the Pound mustered just a marginal recovery this morning.




US housing starts increased to an annual rate of 1.37mn for November from 1.32mn previously. Building permits increased to 1.48mn, the strongest reading since the middle of 2007. Industrial production rebounded 1.1% for November following a 0.9% dip the previous month while the IBD consumer confidence index also strengthened for December. 

Dallas Federal Reserve (Fed) President Kaplan reiterated that it would take a material change in the outlook for him to support a rate cut. He also stated that risks to the outlook are now more balanced than earlier in the year. There were also comments that the labour market can run tighter than has been possible historically without pricing pressures emerging. Boston head Rosengren stated that additional policy easing is unlikely to be necessary in the short term. He would also prefer rates slightly higher, but he is willing to wait for inflation to get closer to 2%. 

The dollar secured only marginal support from the data releases while the Euro hit selling interest just above the 1.1150 level.




ECB council member Peter Kazimir stated that better coordination of fiscal and monetary policies is needed, maintaining the central bank’s recent emphasis. The return of Brexit concerns deterred buying interest in the Euro hampering it’s progress but wouldn’t qualify as a serious concern. The Euro drifted lower at market open ahead of the German IFO business confidence data. 

Data To Watch 

08:30 – EUR – ECB President Lagarde Speaks 

09:00 – EUR – German IFO Business Climate 

09:30 – GBP – CPI

09:30 – GBP – PPI Input 

15:00 – USD – Crude Oil Inventories

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