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Brexit horizon still no closer

Brexit horizon still no closer

UK monthly borrowing fell well short of expectations with a print of £7.956bn; the largest October deficit in three years. Although the monthly data disappointed, the year-to-date deficit declined to £26.7bn from £37.9bn last year.

Chancellor Philip Hammond stated a smooth Brexit would be worth tens of billions to the UK economy as Theresa May held talks with EU Commission President Juncker. Although both sides stated that good progress had been made, Spain is looking for definitive rules on Gibraltar and Ireland themselves could oppose on the Irish border situation.

Significant doubts whether Sunday’s EU Summit would go ahead and speculation that it could be postponed until December meant Sterling edged lower after the meeting. There was strong resistance to the agreement within UK parliament. The Euro closed just above 1.1236 and Sterling failed to hold above the 1.2800 level against the Dollar. Sterling is little changed on market open this morning.


The US Dollar is widely weaker today as increased risk appetite has pushed the Greenback lower. Wall Street stocks rebounded after a tough couple of days, led predominantly by Apple. Risk appetite was also heightened due to the upcoming meeting between US President Trump and President Xi of China.

US durable goods orders declined 4.4% for October compared with consensus forecasts of a 2.2% decline and the September data was revised lower. The increase in underlying orders was held at 0.1% after a revised 0.6% decline the previous month, although the data triggered fresh concerns surrounding capital spending trends. Weekly jobless claims increased to 224,000 from a revised 221,000 previously and continuing claims were also above consensus forecasts. Existing home sales were close to expectations at an annual rate of 5.22mn from 5.15mn previously.

There were reports from the US that the December rate increase was all but assured, but that the Federal Reserve was considering a pause in rate hikes potentially as early as Spring 2019. Speculation over a policy shift hampered the US currency and the Dollar also lost ground against commodity currencies as global risk appetite recovered.

The US is shut today for Thanksgiving, Dollar payments will resume tomorrow.


EU Commissioner Pierre Moscovici stated that the Italian budget issue was very serious and must be corrected, but there was some optimism after Italian Prime Minister Guiseppe Conte pledged reforms. Expectations that the Excessive Deficit Procedure talks would be extended eased immediate bond-market fears. The Euro hit selling interest above 1.1400 against the Dollar and settled in the vicinity. Conflicting comments from Italian politicians triggered further market caution ahead of the today’s European Central Bank (ECB) minutes release.

Data to Watch:

08:15 CHF Industrial Production (QoQ) (Q3)
08:15 CHF Industrial Production (YoY) (Q3)
12:30 EUR ECB Monetary Policy Meeting Accounts
14:45 CAD BoC Wilkins Speech
17:00 EUR ECB’s Mersch speech
20:55 GBP MPC Member Saunders Speech

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