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Last ditch push ahead of Wednesday

Last ditch push ahead of Wednesday

GBP
Friday saw Sterling peak at 1.3258 against the Dollar, but against the Euro it was all downhill shortly after the open from a peak of 1.1430.  Brexit Secretary Dominic Raab raced over to Brussels yesterday trying to hammer out a last-minute agreement ahead of Wednesday’s European Council Meeting, and any subsequent announcement is likely to cause further volatility.

We open this morning at 1.1342 against the Euro and 1.3115 against the Dollar. This week will be significant for UK data releases; labour market, CPI and retail sales reports are all due. Tuesday should see an improvement in wage growth data as skills shortages bite and the headline wage growth is close enough to threaten the 3% level and headline CPI could also print positive. Retail sales data may disappoint but is unlikely to derail the Pound as Brexit deal sentiment is the key driver.

EUR
Friday saw a slight pullback of the Euro against both the pound and the dollar. Soft data coming out of the US mean that despite a small recovery on Friday meant that the pair undid all the good work done in the morning and fell back from a high of 1.1611.

This week has seen the pair settle around the 1.1540 mark due to the Bavarian state elections seeing the incumbents lose a majority and fiscal problems still remaining in Italy. The elections demonstrate a weakening in Merkel’s coalition and increased fears of geopolitical uncertainty in Germany.

Finally Raab and Barnier met for an unscheduled meeting yesterday, with no real progress being made – “There’s no bad news, just a lack of good news” a diplomat told the BBC. This has seen markets slide slightly on Monday morning, but not to worrying levels. The Italian cabinet meets today to approve the budget and confirm the deficit of 2.4%. The EU may reject this which would see more turmoil.

USD
The US Dollar is a healthy green colour after this weekend, trading broadly higher against major currencies.

The Dollar index was up 0.25% at the end of the week, halting the slide of the past couple of days. Chinese trade data showed exports widened with the US, easing concerns about the impact of a trade war.

Looking ahead, Retail Sales for the month of September and the NY Empire State index will be the salient events later today in the NA session with the headline core Retails Sales forecast to hold steady at 0.3%.

24h       ITA Italy budget deadline
12:30    USD Retail Sales ex Autos (MoM) (Sep)
12:30    USD Retail Sales control group (Sep)
12:30    USD Retail Sales (MoM) (Sep)

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