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Juncker hands UK Brexit lifeline

Juncker hands UK Brexit lifeline

GBP

UK Retail sales growth slowed to 0.2% for August and the annual growth slowed to 2.7% from 3.4%. As expected, the Bank of England held interest rates at 0.75% and maintained that gradual and limited interest rate increases would be required over the medium term in the event of a Brexit deal. The bank also warned that growth had slowed, that some spare capacity had re-emerged and that trade war fears had weakened the global growth outlook. And to add to that, further entrenched political uncertainty could damage demand and weaken inflation pressures. The Pound had dipped ahead of the meeting and the cautious statement triggered a little more selling given the dovish outlook. 

Downing Street stated that it had sent written Brexit documents to the EU and after the  close Jean-Claude Juncker stated that a Brexit deal was achievable. The positive rhetoric boosted the Pound to near 1.2550 on the Dollar and 1.1360 on the Euro. 

USD

The dollar was unable to capitalise on gains following Wednesday’s Federal Reserve (Fed)  meeting and yield spreads moved slightly against the US currency while gains in the Euro-zone banking sector helped underpin sentiment. 

The US Philly Fed manufacturing index declined to 12.0 for September from 16.8 previously, although this was slightly above consensus forecasts. The orders components recorded solid growth and there were significant gains in the prices indices while employment increased at a steady pace on the month. Companies were less optimistic over the outlook, although there were still solid readings. Jobless claims were little changed at 208,000 in the latest week and indicated a firm labour market. 

President Trump continued to attack Fed policies, although he stated that Powell’s job was safe, limiting any dollar selling.

 

 

EUR

The optimism around the Euro continues to stay sound but slightly choppy, come the end of the week with the common currency hovering around the 1.1060 mark against the Dollar at the start of Friday’s trading session. The pair is advancing for the second session in a row as market participants continue to digest the recent FOMC event and refocus the attention on the US-China trade front with negotiators expected to meet today ahead of further high-level talks in early October.

On the docket today, German Producer Prices data has already been released. Coming in below expectation at -0.5%, with forecasts consensus at 0.0% and the prior month at 0.1%. 

 

 

Data to watch

07.00 EUR – German PPI

13.15 USD – FOMC Member Williams Speaks

16.20 USD – FOMC Member Rosengren Speaks

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