Supreme Court to deliver Prorogation verdict
Politics failed to help the Pound again yesterday, especially with Michel Barnier stating that UK backstop proposals are unacceptable and it was hard to see how a solution could be reached, but that talks will continue. German Foreign Minister Heiko Maas was a little more upbeat stating that UK proposals were “a step forward”. Irish PM Leo Varadkar and EU Council President Donald Tusk both stated that backstop proposals were not good enough.
The UK Supreme Court ruling is expected at 10.30am, and whilst the outcome is less than predictable we do know the court wishes to stay removed from politics and that any decision against the government would inject further uncertainty. The Euro pushed down to near 1.1300 and the Pound retreated below 1.2420 on the Dollar. Sterling is marginally up on market open and global risk appetite seems stable.
The greenback made a strong start yesterday, trading 0.2% higher against a basket of G-10 currencies. The DXY index rallied to a two-week high despite lack of clarity on ongoing US-China trade discussions.
The US PMI flash September manufacturing index strengthened to 51.0 from 50.3 and above consensus forecasts of 50.4 while the services-sector index recovered slightly to 50.9 from 50.7. Business confidence recovered only slightly from 7-year lows while order backlogs declined and private-sector payrolls declined for the first time since January 2010.
The dollar lost some ground after the releases with the Euro settling around 1.0990 and there was little net change on this morning.
French PMI data came in significantly below consensus forecasts yesterday with the composite index declining to 51.3 from 52.9 previously. The German data was also notably weaker than expected with the manufacturing index dipping sharply to 41.4 from 43.5 previously, the lowest reading since July 2009. The composite index dipped below 50, reinforcing concerns that the German economy would register a recession. The overall Euro-zone PMI composite index held just above 50.0, but was the weakest reading for over six years. The data triggered fresh concerns over the outlook and German yields moved lower again.
The Euro dipped below 1.1000 which triggered further selling pressure and lows around 1.0965 against the Dollar. As of writing, the Euro is currently sitting around the 1.0990 figure.
Furthermore, ECB President Draghi reiterated that Euro growth momentum had slowed remarkably and forward indicators were not showing convincing signs of a recovery. He again called for a coherent strategy to complement monetary policy and incoming head Lagarde also stated that the outlook would be positive if all members started to work from a coherent strategy.
Data to watch
09.00 EUR – German Ifo Business Climate
15.00 USD – CB Consumer Confidence