Concession tug of war continues
EU Chief Brexit negotiator Barnier reiterated his concerns over a lack of progress in trade talks with particular concerns over the recent round in London. He called for the UK to make a move to break the deadlock in order to meet the October deadline. He stated that the EU are prepared to make concessions on fisheries if the UK was also prepared to move as markets continue to expect political dynamics to lead to last minute concessions.
Bank of England officials remained cautious over the outlook with warnings over the threat of permanent scarring. Governor Bailey stated that inflation was likely to be slightly higher than expected with officials also stating room to increase quantitative easing further if necessary.
Despite the cautious comments, Sterling was again resilient with expectations of dovish policies by other central banks continuing to offer protection. The Euro currently holds just above the 1.1250 whilst against the Dollar, Sterling finds itself just above the 1.3280.
The US ADP data recorded an increase in private-sector payrolls of 428,000 for August and well below consensus forecasts of a 950,000 increase for the month. There was only a small upward revision to July’s data to 212,000 from the 167,000 reported originally, although confidence in the data was limited. The New York ISM business conditions index declined to 42.9 from 53.5 previously, increasing concerns that the economy could be losing momentum.
The Dollar built on its corrective bounce from two-year Euro highs and further contributed to the pair’s ongoing downfall. The US currency rebound was tied to Tuesday’s upbeat US data, which showed the manufacturing sector accelerated to a near two-year high in August amid a surge in new orders. Meanwhile, the Dollar bulls largely ignored yesterdays weaker than expected ADP report. Nevertheless, the greenback stood tall and also seemed unaffected by the upbeat market mood.
The Euro was unable to gain traction yesterday as further reservations over the potential for ECB protests against Euro strength. There were additional reports that the central bank is concerned over the currencies strength with speculation over rhetoric to curb the advance at next week’s press conference.
The pair remained under pressure for the third consecutive session and extended this week’s pull back from the key 1.2000 mark, the highest since May 2018.
As of writing, the Euro is currently trading just above the 1.1810 against its US counterpart.
Data to watch
13:30 – USD – Unemployment Claims
15:00 – GBP – BOE Gov Bailey Speaks
15:00 – USD – ISM Non-Manufacturing PMI