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May we see a Brexit summit this month?

May we see a Brexit summit this month?

The UK construction PMI for October beat expectations of 52 with a print of 53.2 based on gains made in civil engineering, although new orders growth slowed. The Pound gained modestly but there was persistent selling interest above 1.3000 against the Dollar. Overall UK sentiment held firm despite pressure for a correction after strong Sterling gains on Thursday, and the Euro hit resistance near 1.1365.

CFTC data recorded a small net increase in bets against the Pound, maintaining the potential for short covering if there is a sustained shift in sentiment. Reports emerged over the weekend that a private Brexit deal had been secured by Theresa May and the Pound spiked higher in the early hours of this morning, although the gains evaporated after reports that Brexit Secretary Raab’s hard-line stance had undermined negotiations. The UK government is hoping to have made enough progress on the customs deal for the EU to arrange an extraordinary summit by the end of November.

Markets remain wary of political headlines and choppy trading. Sterling advanced slightly against the Euro, opening at 1.1428 and 1.3006 against the Dollar. The sole UK data today is Services PMI at 9.30am.


Headline US employment data was above consensus forecasts with an increase in Nonfarm payrolls of 250,000 for October compared with market expectations of 190,000, although there was a downward revision to 118,000 for September from the 134,000 reported originally. Other metrics were in line with market expectations as unemployment remained at 3.7% while the increase in average hourly earnings of 0.2% pushed the year-on-year gain to a nine-year high of 3.1% from 2.8% previously. The trade deficit increased to a seven-month high with imports at record highs while the US deficit with China also widened to an all-time high.

The trade data reinforced trade concerns, but the very solid employment report provided net US currency support and the Euro dipped to lows near 1.1380 late in the New York session as markets continued to price in over an 80% chance of a December rate hike.


Friday was a topsy-turvy day for the Euro, with lows of 1.1300 versus the Dollar to a recovery at 1.1456. Italy’s 2019 budget proposal is still causing issues for the single currency, as is the health of many EU member countries’ banks given their large exposure to sovereign debt. Reports also came out that the European Central Bank (ECB) was considering a second round of a long-term refinancing operation.

President Juncker also commented on Friday that Italy ignoring the budget rules would have “consequences” which, combined with better-than-expected US Nonfarm payroll data, caused the Euro to dip and the Dollar to strengthen.

Very little data is due out today with the UK’s markit services PMI being the only information with any significance. There are some speeches due to be made by ECB Members and Italian Finance Minister Tria is set to meet EU finance ministers in Brussels.

Data to Watch:

01:00 JPY Bank of Japan Governor Kuroda Speech
01:45 CNY Caixin China Services PMI (Oct)
09:30 GBP Markit Services PMI (Oct)
13:10 CAD BoC Governor Poloz Speech
14:45 USD Markit Services PMI (Oct)
14:45 USD Markit PMI Composite (Oct)
15:00 USD ISM Non-Manufacturing PMI (Oct)
23:30 JPY Overall Household Spending (YoY) (Sep)

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