Brexit deal positivity continues
As the effect of Michel Barnier’s optimism of a November deal faded, Sterling had a choppy trading day against the Dollar. The UK’s unemployment rate held steady at 4.0%, a 40-year low. Average earnings data beat consensus forecasts, with earnings including bonus growing 2.6%, and excluding bonus 2.9% in the 3 months to July. Average weekly earnings are up 0.5% in real terms. Despite the positive data set, Sterling failed to hold its six-week highs against the Dollar, slipping to 1.2983 before climbing back to 1.3032 in US trading hours.
Today there are no UK macro data releases, so the likely focus points will be US PPI data and Brexit-related news, especially after Barnier’s comments that a Brexit deal is realistic within the next 8 weeks.
The Dollar Index is positive this morning, with the Australian Dollar caught in the crossfire of a trade dispute between global superpowers, the US and China. The market continues, however, to take a cautious approach amidst trade war headlines.
The World Trade Organisation (WTO) signaled that China has asked for authorization to impose trade sanctions on the US. A week has passed since the public hearing period ended for another set of tariffs on $200bn of imports from China, which makes it possible that the new tariffs could be announced today, if the same pattern is followed as in May, when the last tariffs were announced.
Today sees the release of the US PPI data due at lunchtime today, expected to arrive stronger for the month of August. Apart from the data, Fed Speakers will be closely heard, as the FOMC members, Bullard and Brainard hit the wire. The White House Twitter feeds are expected to be especially active, with the currency market keeping a close watch on new developments related to ongoing NAFTA talks between Canada and the US.
There were mixed messages on Brexit yesterday, meaning the Euro had a more volatile day yesterday than expected. The EU wants to downplay expectations of a quick deal, while the Irish PM said a deal could be done in a matter of weeks. Negative news on the US/China trade deal strengthened the Dollar towards the end of Tuesday’s session, which caused a slight dip in the Euro.
Employment figures in the Eurozone rose by 0.4% QoQ and rose 1.5% YoY. German investor confidence also rose yesterday, underpinning a steady day for the Euro. Eurozone industrial production is, however, expected to fall off the back of a period of slowdown in Germany.
There is not a lot of data to expect today, but the most significant will be the previously mentioned industrial production number, due at 10 A.M. Some other pieces of data are being released from Spain and Italy, but the markets are already looking towards Thursday from a data perspective.
Data to watch
10:00 EUR Industrial Production s.a. (MoM) (Jul)
13:30 USD Producer Price Index ex Food & Energy (YoY) (Aug)
19:00 USD Fed’s Beige Book