Chaos Destined for the Commons27th November 2018
The Pound has been firmer of late, although remains vulnerable considering PM May will now face her biggest challenge when she takes the Brexit deal to the UK Parliament where she needs it to be approved. This is where the major risk lies for the Pound.
After resolving the Gibraltar issue, Sunday’s EU Council meeting was convened and the EU 27 quickly ratified the agreement. The EU insisted that there would be no further negotiations and that this was the only deal available, but there was still strong domestic political opposition to the agreement.
The latest indications are that a meaningful parliamentary vote will be held around December 12th and Sterling sentiment will remain very fragile without evidence of a shift in parliamentary arithmetic. The UK currency was held around 1.2820 against the Dollar on Monday open while the Euro traded just above 1.1290.
The US PMI manufacturing index declined to a three-month low of 55.4 for November from 55.7 previously while the services sector index also retreated to a two-month low. There was a slowdown in new orders growth with particular weakness in the export sector as trade tariffs had a significant impact. Employment growth in the services sector was the slowest since June 2017 which also triggered some doubts over the outlook.
The Dollar was resilient amid renewed concerns surrounding the Eurozone and global growth outlook with the Euro dipping to below 1.1350 with no support from Brexit hopes.
Besides inflation figures later in the week, the Dollar will look to both the Fed minutes and the 1st December Xi Jinping-Trump meeting where a possible ceasefire could be seen.
Continued tension between Italy and the EU Commission seemed to weigh heavily on the trading session on Friday which saw the Euro hit 1.1327 against the Dollar – a five-day low from 1.1430. We also saw disappointing data from the flash Eurozone PMI prints, particularly from Germany, which triggered some selling of the single currency. The reason this is important is that it casts doubt over the European Central Bank’s (ECB) policy outlook.
Over the weekend we saw the UK’s Brexit deal being approved by the EU and murmurs from Italian Deputy PM Salvini that they were prepared to compromise on the budget. Despite this, the Euro opened cautiously this morning, opening around the 1.1350 mark versus the Dollar and 1.1280 versus the Pound.
Data today is minimal, with speeches dominating the news. The ECB’s Praet, Nowotny, Coeure and Draghi speak today, with Draghi due at 14.00. This evening, Bank of England Governor Carney gives a speech which rounds off today’s data.
Data to Watch:
24h EUR EU Brexit Summit
05:00 JPY Leading Economic Index (Sep)
05:00 JPY Coincident Index (Sep)
09:00 EUR IFO – Current Assessment (Nov) (Germany)
09:00 EUR IFO – Business Climate (Nov) (Germany)
09:00 EUR IFO – Expectations (Nov) (Germany)
09:00 EUR ECB’s Praet Speech
12:00 EUR ECB’s Nowotny Speech
12:30 EUR ECB Cœuré Speech
13:30 USD Chicago Fed National Activity Index (Oct)
14:00 EUR ECB President Draghi’s Speech
18:30 GBP BOE’s Governor Carney speech
22:45 NZD Imports (Oct)
22:45 NZD Exports (Oct)
22:45 NZD Trade Balance (YoY) (Oct)
22:45 NZD Trade Balance (MoM) (Oct)
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