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Will Barnier agree to discuss trade?

Will Barnier agree to discuss trade?

Concerns are increasing over the Pound’s vulnerability if there is no agreement to expand Brexit negotiations at the key summit next week. The financial sector has increased pressure on Brexit talks as the Treasury reports that international banks would decide in early 2018 (first quarter) whether they are going to move operations away from the UK.

Overall Sterling moves were caused by larger moves from the Dollar and Euro following domestic uncertainty, however, some net support was created by speculation of a rate hike in November. GBPUSD moved to highs of 1.3230 while GBPEUR was trading around levels of 1.1123 before moving to 1.1173. The latest Royal Institution of Chartered Surveyors (RICS) house-price index was unchanged at 6% for September as GBPUSD advanced to 1.3250.

Brexit Secretary David Davis and the EU’s Michel Barnier are expected to reveal later today whether enough progress has been made to begin trade talks.


The September Federal Reserve (Fed) minutes failed to impress with the Buck falling sharply against the majority of major currencies.

According to reports, many Fed officials expected another rate hike this year despite the hurricane disasters, which was perceived at one point to pose a threat to the economy. We also saw wages rising over in the US, which should, in theory, help to boost future inflation. The problem that became an apparent theme was that many Fed officials were concerned that the current low inflation is not transitory and hence a few members wanted any hike delayed until inflation ticks higher.

It is clear that the majority in the Federal Open Market Committee (FOMC) continue to believe in the Phillips curve, despite its absence in recent years. The market perceived yesterday’s FOMC minutes as dovish, as inflation could now stay in low levels for longer, while the Committee gave no clues regarding the Fed’s target for its balance sheet.

In the US data space, the usual report on initial claims is due, seconded by September’s producer prices and speeches by FOMC’s L.Brainard and J.Powell.


Spanish Prime Minister Rajoy gave a relatively reserved speech yesterday on the Catalan situation, demanding clarity on whether independence will be declared by the Catalan leader Carles Puigdemont and the regional government. Tensions did, however, seem to ease due to his measured tone, returning optimism for the Euro.

The European Central Bank’s (ECB) chief economist Peter Praet stated that Eurozone inflation had shown some positive signs, but insufficient progress towards the target as tensions increased ahead of monetary policy meeting at the end of October.

Otherwise, it was a very quiet day in the Euro yesterday as the single currency was mainly governed by surrounding events. Against the Dollar, the pair closed the day off at 1.1863 as the Euro strengthened gradually across the day.

Politics and central banks will take centre stage for the Euro today with a light calendar as speeches from President Draghi and Praet are due. Further, industrial production for August in the Eurozone are out combined with inflation numbers for France and Sweden.

Data To Watch:

07:45 EUR Consumer Price Index (EU norm) (YoY) (Sep)
07:45 EUR Inflation ex-tobacco (MoM) (Sep)
07:45 EUR Consumer Price Index (EU norm) (MoM) (Sep)
10:00 EUR Industrial Production w.d.a. (YoY) (Aug)
10:00 EUR Industrial Production s.a. (MoM) (Aug)
13:30 USD Continuing Jobless Claims (Sep 29)
13:30 USD Initial Jobless Claims (Oct 6)
14:00 GBP MPC Member Haldane Speech
15:30 USD FOMC Member Brainard Speech
15:30 USD FOMC Member Powell Speech
15:30 EUR ECB President Draghi’s Speech
15:30 EUR ECB’s Praet Speech
19:00 USD Monthly Budget Statement (Sep)
21:00 EUR ECB Cœuré Speech
21:10 EUR ECB’s Lautenschläger Speech


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