EU: Brexit deal is very close6th October 2018
Yesterdays UK data docket was empty leaving the Pound’s fortunes to be dictated by global influences. With the UK party conferences out of the way Brexit negotiations are taking on a more serious tone. Reports emerged that the UK was considering fresh proposals on Northern Ireland, potentially UK remaining in the customs union as a backstop position. The Pound rose after Irish officials stated that they would favour that solution and an EU source suggested it would make compromise possible. EU Council head Donald Tusk also reiterated the offer of an extensive free-trade Canada-style deal.
Concerns linger that any brexit deal could be shot down by the Parliamentary vote and the Pound was stymied by a dip in risk appetite and also oil prices. In spite of this, the Pound managed to regain the 1.3000 level against the Dollar and the Euro fell back to 1.1312, two months lows.
The Euro managed to find support above 1.1460 against the Dollar and regained lost ground as German bond yields increased although sentiment remains fragile. Part of that fragility is down to EU officials suggesting that Italian budgetary debt plans would lead to a massive debt restructuring risk unless adheres to Brussels’ budget rules. The rhetoric coming from Italy and the Eurozone today will be scrutinised.
The US Dollar is widely mixed yesterday but stronger against safe-haven currencies as US Treasury bond yields hit a seven-year high. This followed Federal Reserve (FED) members striking a more hawkish tone.
US jobless claims declined to 207,000 in the latest week from 215,000 maintaining the strong run of labour-market data. The dollar was vulnerable following sharp gains from the previous day, whilst there is also an element of caution ahead of today’s employment report amid concerns that a very strong report has already been priced in. The sentiment was still strong with the US currency also underpinned by weakness in commodity and emerging-market currencies.
Data to watch:
12:30 USD Non- Farm Payrolls (Sep)
12:30 USD Average Hourly Earnings (YoY) (Sep)
12:30 USD Unemployment Rate (Sep)
12:30 USD Labor Force Participation Rate (Sep)
12:30 USD Average Hourly Earnings (MoM) (Sep)
12:30 USD Trade Balance (Aug)
18:00 USD Baker Hughes US Oil Rig Count
19:00 USD Consumer Credit Change (Aug)