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Tusk, Tusk, Tusk, Still no closer

Tusk, Tusk, Tusk, Still no closer

Without the distraction of UK economic data, Brexit developments dominated Sterling trading again. Wednesday’s European Council meeting is earmarked as the point at which the EU will decide to press ahead with a November Brexit meeting to sign off withdrawal agreement and framework for a trade deal. Sterling recovered some ground after reports that the EU Commission had accepted the UK’s backstop plan, although it confirmed that their own backstop was also needed. Tensions remained very high as domestic pressure prevented Theresa May from backing EU proposals.

The Euro found support around the 1.1365 mark as fears over ‘no-deal’ increased. Theresa May attempted to reassure parliament by stating that real progress had been made; that any UK-wide customs arrangement would end by the end of 2021 and that any internal customs borders would not be acceptable. The Pound was able to muster limited gains after the comments, consolidating around 1.3150 against the Dollar and 1.1365 against the Euro.

Tensions remain above simmering point as Donald Tusk warned little progress had been made and that “no deal” was more likely than ever. There will be a key cabinet meeting today but UK labour-market data should provide an interim distraction.


Headline US retail sales increased 0.1% for September compared with consensus estimates of 0.7% and there was also a miss for the underlying reading with a 0.1% monthly decline. In contrast, there was a 0.5% increase in the control group compared with expectations of a 0.3% gain. The New York Empire manufacturing index strengthened to 21.1 for September from 19.0 previously and slightly above consensus expectations. There were also slightly softer monthly readings for the prices paid and employment indices.

The Dollar dipped lower following the retail sales release, although the overall reaction was muted and the Euro hit further selling interest close to 1.1600 with consolidation near 1.1580 as the US currency regained an element of support.


Yesterday saw the Euro fail to break the 1.16 mark versus the Dollar which caused some new selling of the single currency. The perceived inability of politicians to secure Brexit is proving to be a barrier to any gains and, combined with the instability in Italy, the Euro is suffering.

Italian Deputy PM Di Maio reiterated that Italy did not plan to leave the EU which briefly caused Italian bonds to gain some ground, but after the European close, PM Conte announced the Cabinet had approved the budget which will inevitably lead to a clash with the EU Commission.

Quite a lot of data is due out today but none that should cause volatility. German import price index, Italian industrial sales/orders and average earnings including bonuses out of the UK. The afternoon sees some more data but all eyes are on tomorrow with CPI numbers due out.

Data to Watch:

08:30 GBP Average Earnings including Bonus (3Mo/Yr) (Aug)
08:30 GBP Average Earnings excluding Bonus (3Mo/Yr) (Aug)
08:30 GBP ILO Unemployment Rate (3M) (Aug)
08:30 GBP Claimant Count Change (Sep)
12:30 USD Core Personal Consumption Expenditures (QoQ) (Q3)
12:30 USD Personal Consumption Expenditures Prices (QoQ) (Q3)
13:15 USD Industrial Production (MoM) (Sep)
13:15 USD Capacity Utilization (Sep)

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