Boderline Brexit3rd October 2018
The Pound rose slightly yesterday on news of a possible compromise on the Irish Border. Yet, the Pound has since pared gains against the US dollar on growing uncertainty surrounding the ongoing Conservative Party Conference in Birmingham through Wednesday.
The GBP/USD pair hit a daily high of 1.3115 backed by headlines indicating that the UK is willing to accept some checks in the Irish sea, a way to solve the Irish border issue and get a Brexit deal, with Sterling also supported by an upbeat UK Markit Manufacturing PMI up in September to 53.8, above the market’s forecast of 52.5 and the previous 53.0. The Pound, however, was unable to hold on to gains, having spent most of the day trading just above Friday’s close of 1.3028.
The UK will release the Nationwide Housing Price Index for September, and more relevant, the Construction PMI expected at 52.5 from the previous 52.9 later today.
The US Dollar was seen mixed yesterday following a United States-Mexico-Canada Agreement (USMCA) deal being done between the US, Canada and Mexico. The pact which was agreed to in principle before the dawn of a fairly quiet day for US data.
The USD strengthened, despite manufacturing activity expanded at a slower-than-expected pace with the ISM Manufacturing index resulting at 59.8, down from 61.3 in August.
Today, the macroeconomic calendar will be lighter, with the only relevant event scheduled being a Fed’s Powell speech, due to speak about the outlook for employment and inflation at the National Association for Business Economics Annual Meeting, in Boston.
Fears over the Italian budget and pressure on the Italian bond market meant the Euro had a day to forget yesterday. Bond markets saw more selling and news that Economy Minister Tria was leaving Brussels early to work on the budget saw the banking sector take a hit. Monday saw even more rumours that the EU would reject the budget meaning the Euro dipped to 1.1570 against the dollar.
The euro-zone unemployment rate fell to 8.1%, the lowest it has been since 2008 but this did little to help the slide. EU Markit Manufacturing PMI numbers were underwhelming pointing to the slowest rate of growth in two years. This morning has seen Italian bonds repeating its form of the last few days which has pushed the Euro below 1.1550.
Very little data is due today with the UK’s PMI Construction numbers being of most significance within Europe. The Fed’s Powell is giving a speech this evening which will probably prove to provide the most volatility.
Data to watch:
08:30 GBP PMI Construction (Sep)
14:00 USD Fed’s Quarles speech
16:00 USD Fed’s Powell Speech