Brexit talks gathering pace
Dutch Foreign Minister, Stef Blok, confirmed that yesterday’s Brexit talks were “serious” but that “they were not there yet” and the UK government confirmed that negotiations would intensify next week. Jeremy Corbyn stated that he will attempt to prevent parliamentary prorogation on Tuesday. Market caution persisted on no-deal fears given the lack of a breakthrough.
Sterling hovered just under the 1.2200 mark against the Dollar and edged up to near 1.1040 on the Euro. The Lloyds business barometer dropped to 1 for August from 13 last month, an 8 year low. Consumer confidence also fell, from -14 from -12, a six year low. The Pound opens this morning below 1.2200 and the Euro near 1.1025. There is a high chance of volatile trading conditions due to month end – especially near the London fix (4pm).
The updated US second quarter GDP data recorded a figure of 2.0% from 2.1% previously and in line with consensus forecasts. Initial jobless claims also met market expectations at 215,000 from 211,000 previously while the July goods trade deficit narrowed to $72.3bn from $74.2bn the previous month.
The Dollar is largely flat this morning as tensions with China seemingly eased somewhat. U.S. President Donald Trump confirmed discussions were taking place on Thursday, ahead of a looming deadline for additional U.S. tariffs on the 1st Sept. The Federal Reserve is expected to cut rates by 25 basis points at its next meeting in September to support the economy in the face of a trade risk. Soon after Thursday’s data release, President Trump once again continued to criticise Fed Chair Jerome Powell for not cutting rates enough.
The Euro is currently trading at 1.1035 against the Dollar having briefly moved higher yesterday after hitting selling interest around the 1.1090. The Pair soon retreated to fresh intraday lows of 1.1042 towards the end of the European close.
German August unemployment figures increased 4,000, the second successive monthly increase and in line with consensus forecasts. Consumer prices declined 0.2% for the month compared with consensus forecasts of a 0.1% decline with the year on year rate at 1.4% from 1.7%. The data maintained unease over German and wider Euro-zone economic trends Incoming ECB President Lagarde stated that the central bank had not hit the lower bound of interest rates, although low interest rates had implications for banks. She also stated that the ECB had a broad toolkit and needed to act. The comments triggered another round of Euro selling, especially with no fresh rhetoric on potential fiscal stimulus.
Data to watch
10.00 EUR – CPI Flash Estimates
13.30 USD – Personal Spending
13.30 USD – Core PCE Price Spending
14.45 USD – Chicago PMI