Theresa May to discuss Brexit with Europe
Bank of England (BoE) Governor and Chairman of the Monetary Policy Committee, Mark Carney, gave a speech on Friday on the bank’s limit for a slight inflation rise to a 2% target. Currently inflation sits at 0.6%. The recent case between Tesco and Unilever may only be the beginning, as manufacturers struggle to absorb the price rises without passing them onto consumers.
This week Theresa May plans to meet and discuss the direction of Britain with 27 European government officials, and has done so already with 14. In particular, all eyes will be on the meeting between the Prime Minister and the President of the European Commission, Jean-Claude Juncker, as the Pound may hit another pothole. This is because people are beginning to become frustrated with the lack of disclosure of what form the Brexit will actually take.
If Theresa May doesn’t bring to light the topic of providing power to Scotland after the Exit, then a second Scottish Independence Referendum may well be on the cards. BoE Governor Carney foresees that if the Pound doesn’t strengthen and uncertainty continues to rise, the UK can expect prices to rise dramatically for commodities such as olive oil, gas and other supermarket goods.
The Euro weakened by 0.2% versus Sterling during Friday’s European trading session amidst positive data releases from the Eurozone. European Trade Balance figures came in better than expected at €23.3Bn, beating July’s figure of €20Bn. The single currency ended the week trading around the 1.1090 levels against the Pound.
The US Dollar traded towards a seven-month high on Friday, after U.S. retail sales data gave more confidence and the possibility of higher interest rates before the end of the year. Retail sales rose 0.6% last month to snap back from a small drop recorded in August. Retail sales has had a gradual slow down in growth over the past 18 months. This has been partly due to cheaper gas allowing the States to save on energy costs.
The University of Michigan’s Index of Consumer Sentiment slumped, hitting its lowest level since September 2015. Market participants had expected the index to be higher in October and up from September’s final reading. The report stated that it was likely that uncertainty around the upcoming Presidential election had been negatively guiding consumers.
Data To Watch: 9:00am EUR Consumer Price Index – Core (MoM) (Sep), 1:15pm USD Industrial Production (MoM) (Sep), 1:15pm USD Capacity Utilization (Sep), 4:15pm USD Fed’s Stanley Fischer speech, 5:35pm EUR German Buba President Weidmann speech, 5:35pm EUR ECB President Draghi’s Speech, 10:45 NZD Consumer Price Index (YoY) (Q3).