EU Hardening Fisheries Stance
GDP increased 2.1% for August compared with expectations of 4.6% and industrial data was also weaker than expected with a 6.4% annual decline. The data maintained reservations over the underlying recovery outlook and the UK currency as BoE Governor Andrew Bailey also reiterated the risks to the country are very much to the downside. With a strong hope that a Brexit deal would be agreed, Bailey went on to comment that the post transition period would not be easy.
Rhetoric surrounding Brexit trade talks continued with further reported comments from Michel Barnier that a deal was unlikely by the October 15-16th Summit while EU Council President Charles Michel called for greater UK clarity. There were also reports that Barnier had been instructed to keep a hard-line position on fishing.
Sterling continues to also be hampered by on-going concerns over increased coronavirus cases, although there were also reports that Chancellor Sunak could introduce a local furlough scheme.
US initial jobless claims declined slightly to 840,000 from a revised 849,000 the previous week, but slightly above consensus forecasts of 820,000. Continuing claims declined sharply to 10.98mn for the week from 11.98mn the previous week and there was a net decline in those receiving pandemic unemployment assistance. The drop in continuing claims provided an element of reassurance over trends, but initial claims remained at very high levels.
The dollar was hampered by generally firm risk conditions which limited potential defensive demand..
Boston Federal Reserve (Fed) President Rosengren commented that more quantitative easing is still worth weighing despite limited gains, maintaining market expectations that the central bank could sanction further stimulus. Kansas City Fed President George stated that the new inflation framework is for a tolerance of inflation above 2%. She also warned that the outlook had substantial risks.
Underlying real yields remained very low which continued to undermine dollar support.
The Euro seems to be navigating with no clear direction as we close this trading week.
As the Dollar drifts lower today amid a lack of defensive demand and gains for commodity currencies. Position adjustments could also be a significant element heading into the weekend.
As of writing, the Euro currently trades around the 1.1775 mark against its US counterpart.