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Deal done! Trade talks to commence

Deal done! Trade talks to commence

GBP
The UK managed to strike a historic deal with the EU on the Brexit settlement bill early this morning, opening doors for the trade talks and a smooth Brexit transition. The deal ensures special rights for four million citizens and paying €40bn – €60bn in a hard-fought Brexit divorce settlement that clears the way for trade talks next year. Most significantly, there will be no new borders or barriers in Ireland.

Theresa May and Jean-Claude Juncker, the European Commission president, met early on Friday to sign off a 15-page “progress report” that will allow EU negotiators to recommend opening a second phase of talks on post-Brexit relations. Shortly after the breakfast started, Mr Juncker’s chief of staff Martin Selmayr tweeted pictures of white smoke rising from a chimney stack, indicating the deal was done.

The GBPUSD pair staged a solid comeback and reached the 1.3500 level, having slumped to 1.3455 levels in a knee-jerk reaction after the Brexit deal was announced. Focus now shifts towards the UK industrial and manufacturing production data due to be released alongside the goods trade balance for further momentum and, of course, more details on the Brexit deal.

USD

It was another quiet day of trading for the Dollar as limited data restricted any major fluctuations for the currency. US jobless claims decreased to 236,000 from 238,000 previously which continues to support the underlying confidence in the labour market but had no significant impact.

The main story today for the Dollar centres on the nonfarm payrolls report and unemployment rate. Market consensus is that unemployment remains unchanged at 4.1% and an added net of 200,000 jobs to the US economy. If both are in-line with expectations, the outlook surrounding the US economy may be firm enough to cause a rise in the Dollar.

Concerning the Fed, expectations are for a rate hike next week and today’s data will be the finishing touch for the Fed to continue with its plan unless there is a poor report. Weak data will sow seeds of doubt going forward whilst strong data will bolster confidence and push for the Fed for a more aggressive stance next year.

EUR

Eurozone GDP was unrevised at 0.6% according to the revised estimate, maintaining underlying confidence in the outlook, although German bunds recovered from initial losses and yields edged lower on the day which curbed Euro support.

The Euro is trading down 0.2% at around $1.1750 against the US Dollar.

An increasing number of European Central Bank (ECB) officials have been more vocal on the need to end QE despite undershooting the price stability objective, given growth is so strong. Any hint that this ‘hawkish’ camp is gathering more members will mean forward guidance could be updated sooner than expected, propelling the Euro higher.

Data To Watch:

24h USD US Government Shutdown Limit
07:00 EUR Trade Balance s.a. (Oct)
07:00 EUR Exports (MoM) (Oct)
07:00 EUR Current Account n.s.a. (Oct)
07:00 EUR Imports (MoM) (Oct)
09:30 GBP Industrial Production (YoY) (MoM) (Oct)
09:30 GBP Manufacturing Production (YoY) (MoM) (Oct)
13:00 GBP NIESR GDP Estimate (3M) (Nov)
13:30 USD Labor Force Participation Rate (Nov)
13:30 USD Unemployment Rate (Nov)
13:30 USD Nonfarm Payrolls (Nov)
13:30 USD Average Weekly Hours (Nov)
13:30 USD Average Hourly Earnings (YoY) (Nov)
18:00 USD Baker Hughes US Oil Rig Count

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