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Fostering a better Brexit

Fostering a better Brexit

GBP
Market caution surrounding Brexit negotiations meant Sterling drifted lower yesterday morning. A Whitehall spokesman stated that Northern Ireland backstop proposals would be published in due course and that the EU needed to move its negotiating position. In the Eurozone reports it emerged that the European Commission would not formally adopt a draft UK relationship text this Wednesday. Both statements dampened recent optimism and the Pound dipped below 1.3050 against the Dollar and 1.1365 against the Euro, despite concerns emanating from Italy.

After lunch, the EU proposed facilitating customs checks away from the Irish border which restored some optimism and Sterling pushed back to near 1.3100 against the Dollar while the Euro drifted to near 1.1400. Overnight, British Retail Consortium data recorded a 0.2% annual decline in like-for-like retail sales. Today, we have the Bank of England’s Ben Broadbent speaking and Arlene Foster meets Michel Barnier to discuss the border issue.

The Pound opens today just above 1.3100 on the Dollar and 1.1397 against the Euro.

USD

The Greenback shed some ground late last night as risk aversion eased, with Wall Street reversing early losses seen during the day.

US Treasury yields, meanwhile, advanced to fresh multi-year highs, with the yield on the benchmark 10-year note up to 3.26% ahead of the opening, giving the Greenback a lift against all of its major rivals.

US Secretary of State Michael Pompeo met with Chinese officials in Beijing yesterday, where talks escalated after Chinese Foreign Minister Wang Yi accused the US of “escalating trade disputes, interfering on Taiwan and meddling in the country’s domestic affairs,” according to Bloomberg.

Later in the day, the US has little to offer, with only a speech from the Fed’s Evans and the IIBD/TIPP Economic Optimism Index for October, this last seen at 54.6 vs. the previous 55.7.

EUR

Yesterday saw Italian Deputy PM Salvini renew his attacks on the EU and in particular EU Official Juncker over budget targets set. He again mentioned that Italy is not going to leave the EU but the market remained very nervous.

Italian/German yields widened to five-year highs whilst the Euro hit 1.1460 versus the Dollar early on yesterday. European Central Bank (ECB) Member Knot mentioned they would start to talk about the timing of interest rate moves early next year which helped the Euro strengthen to 1.1500 at the end of the session.

Data today is minimal for the Eurozone, with the only news being German Trade Balance figures and MPC Member Broadbent’s speech. No volatility is expected from these pieces of data, but in what seems to be the norm now, all eyes will be on Rome.

Data to Watch:

06:00 GER Trade Balance s.a. (Aug)
12:15 CAD Housing Starts s.a (YoY) (Sep)

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