Brexit is Brexit is before March
Friday’s upward revision to the UK Quarter on Quarter Q2 GDP reading from 0.6% to 0.7% was offset by a downward revision to the annualised data to 2.1% from 2.2%. Current account data was better than expected with a £28.7bn deficit and the first-quarter deficit was revised sharply lower to £27.0bn from £32.6bn, although both figures were still close to 6% of GDP.
Theresa May has finally indicated a deadline by which Britain will trigger Article 50, putting to rest the rumors about a delayed process. It is now likely that we will see the UK conclude its pull out from the EU by as early as March 2019. Consequently, Sterling has suffered a sell off shortly after opening this morning at 1.1472 versus the Euro and 1.2877 against the Dollar.
In the US, Core Personal Consumption Expenditure edged higher at 0.2% for the month with the annual increase rising to a six-month high of 1.7% from 1.6%, not far from the Fed’s target of 2%. The Chicago PMI data was stronger than expected and there was also an upward revision to the University of Michigan consumer confidence data. This ensured a positive sentiment for the Dollar into the weekend.
The US manufacturing data later this afternoon will hit the Dollar if the figures are not on target. After August’s publication showed a decline, further poor data will raise fresh doubts surrounding the outlook of the US Economy.
The Eurozone Consumer Price Index rose to 0.4% from 0.2%, the highest reading since late 2014, but the core rate held at 0.8% compared with expectations of a slight rise to 0.9% for the month. Although improved, the European Central Bank will still be uneasy over the low underlying rate of inflation.
Over the weekend, German media revealed fresh speculation on whether Deutsche Bank could be bailed out by the German state. Angela Merkel had voted against a similar package for Italian banks only this summer and some fear it could lose more votes for the CDU, Merkel’s party, in the upcoming elections. Deutsche employees will take some cheer from rumours that the bank is reportedly close to agreeing US$5.4bn settlement with the US Department of Justice, lower than the original US$14bn, but still enough to keep those cardboard boxes within arms’ reach.
Data to watch: 9am Euro September Markit Manufacturing PMI, 9.30am UK September Markit Manufacturing PM. 2.45pm US September Markit Manufacturing PMI 3pm US ISM Manufacturing PMI, ISM Prices Paid, August Construction Spending month on month.