Deal rumours take backseat as Italy retakes the headlines
Brexit rumours and reports slowed up yesterday but sources continued to suggest a Cabinet meeting might materialise on Monday. A potential sticking point would be EU insistence that the UK would have to accept a backstop with no escape clause or any future trade deal would demand lasting Customs Union membership. A further report stated that Brexit Secretary Raab would meet the EU’s Michel Barnier on Tuesday with the full withdrawal agreement released on Wednesday.
Sterling drifted weaker over the day, fading to 1.3100 against the Dollar and the Euro pushed to near 1.1440 before falling back to 1.1494. UK sources dampened expectations of an imminent Brexit deal and market optimism faded slightly. The Pound dipped to below 1.3050 against a Strong Dollar and dipped again this morning. Markets are wary of choppy trading conditions today given positioning ahead of the weekend and the latest UK GDP data.
The number of unemployed Americans is holding steady this month near 214,000. The data release follows a dramatic midterm election day and an announcement that the Federal Reserve (Fed) will wait for now on increasing interest rates. Gold slipped slightly yesterday too, as the US Dollar strengthened considerably against the Pound and the Euro.
The Federal Reserve Open Market Committee (FOMC) maintained the Fed funds rate in the 2.00-2.25% range with a unanimous decision. Risks to the economic outlook were still seen as roughly balanced while inflation remained close to the Fed target. The pace of business investment had slowed, but the unemployment rate had declined. The Fed expected interest rate increases to continue and there was no hint of a pause amid a very tight labour market with strong expectations of a December hike.
Today, in terms of economic data, sees Producer Prices and the preliminary print of the U-Mich index across the pond.
Yesterday saw the Euro slide further from the 1.1500 mark versus the Dollar over renewed fears surrounding the Italian debt situation. The European Commission’s deficit forecasts for Italy were strongly criticised by Italian PM Conte and Economy Minister Tria which saw the currency slide further.
Weaker GDP forecasts out of Europe and European Central Bank (ECB) President Draghi’s speech seeming to confirm that forward guidance could be adjusted if needed did nothing to help the recovery despite him mentioning that wages were increasing. Cautiousness surrounded the Fed’s rate announcement meant the Euro drifted below the 1.1400 mark versus the Dollar.
Virtually no data is due out in Europe today, but the UK sees Q3 GDP figures and September GDP figures being released which will attract some attention. The ECB’s Coeure speaks at 10 am and then we have US data for the rest of the day.
Data to Watch:
00:30 AUD RBA Monetary Policy Statement
00:30 AUD Investment Lending for Homes (Sep)
00:30 AUD Home Loans (Sep)
01:30 CNY Producer Price Index (YoY) (Oct)
01:30 CNY Consumer Price Index (MoM) (Oct)
01:30 CNY Consumer Price Index (YoY) (Oct)
09:30 GBP Gross Domestic Product (QoQ) (Q3)
09:30 GBP Gross Domestic Product (YoY) (Q3)
09:30 GBP Manufacturing Production (YoY) (Sep)
09:30 GBP Manufacturing Production (MoM) (Sep)
09:30 GBP Industrial Production (MoM) (Sep)
09:30 GBP Gross Domestic Product (MoM) (Sep)
10:00 EUR ECB Cœuré Speech
13:15 USD Fed’s Quarles speech
13:30 USD Producer Price Index ex Food & Energy (YoY) (Oct)
15:00 USD Michigan Consumer Sentiment Index (Nov)
18:00 USD Baker Hughes US Oil Rig Count