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Brexit brunch in Brussels

Brexit brunch in Brussels

The UK manufacturing PMI strengthened to 58.2 for November, and October was revised-upward to 56.6. The November reading was the highest reading for over four years, boosting confidence in the growth outlook, however, Sterling was unable to gain fresh support, especially as bond yields declined. The Pound failed to hold above 1.3500 against the Dollar while the Euro rallied to around 1.1325.

The latest CFTC data recorded a move to a net long, non-commercial position, limiting the potential for fresh buying support. Political developments will be important with today’s crucial meeting between Prime Minister May and EU Commission President Juncker. EU rhetoric during the Eurogroup meeting will also be watched very closely with officials demanding further UK concessions to agree moving forward to trade talks. Sterling consolidated little-changed ahead of these key events with some optimism that a deal would be reached, although there was no significant buying interest as uncertainty dominated.


US ISM manufacturing index showed a weak outing last Friday, although strong in historic terms, as a reading of 58.2 was down 0.5 from the previous month. On the other hand, orders and production components coupled with employment and prices elements, which were close to 2017 highs, showed a firm reading.

Late Friday afternoon, the US Senate, by a vote of 51-49, approved the tax reform legislation which now opens the door for the Senate and the House to formulate a joint bill. This will be Trump’s first major success story if all goes to plan. Further, the Federal Reserve officials continue to back further tightening come 2018 which gave a boost of confidence for the Dollar. A December rate hike is also still on the cards.

With a busy day Friday, the Dollar was able to recover some ground lost from the earlier stages to the week, although not significantly. Cable closed the week around the 1.3470 mark whilst, against the Euro, levels closed just shy of the 1.19 mark.


The Euro fell for the first week since the end of October with the high for the week set last Monday near $1.1960. The fall seen was due to the US Dollar being boosted by progress in the US tax cut plan over the weekend.

The big market mover today rests on the Eurogroup which is set to convene discussing Brexit progress before the European Summit. Also, the UK Prime Minister Theresa May meets Jean-Claude Juncker at lunch today in Brussels to try to finally agree a deal for the UK’s European exit.

The Euro will take cues from EZ Sentix confidence and PPI numbers due today.

Data to Watch:
24h EUR Eurogroup meeting
09:30 GBP PMI Construction (Nov)
10:00 EUR Producer Price Index (YoY) (Oct)
15:00 USD Factory Orders (MoM) (Oct)

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