Previous Day's Market Highlights
The world does not stop revolving when the US has a public holiday, but the extended nature of Thanksgiving takes a chunk of traders out of the market resulting in lower liquidity and markets often unwilling to take a view. That may be true of some markets, but not all, as shown with sterling yesterday as the latest newsflow on Brexit gave traders something to go on. However, whether they have got it right is another matter.
Sterling jumped on a draft agreement setting out a bunch of principals for the future trading relationship between the UK and EU. All sounds great, except the UK Parliament is deeply (and I mean deeply) sceptical on anything that Theresa May seems to be able to produce. The Brexiteers do not want any part of the “Northern Ireland backstop”, which would in effect treat Northern Ireland differently to the rest of the UK in the event that no agreement can be reached. Whilst there is a large portion of pro-Remain MPs in Parliament that see this as an appeasement that tries to please all sides but in the end pleases no one. The Labour Opposition does not know how it would deal with the situation in a realistic manner and so puts up fantastic obstacles for Mrs May, many of which could never be achievable in the real world.
Aside from all of that, will the EU sign off on the deal? Will Spain veto? Although sterling regrouped yesterday, this is a rally that appears doomed to fail along with Mrs May’s deal, whilst the negative correlation between sterling and FTSE 100 was again back in play yesterday. There will be some trading today but given the early close of markets, volumes are likely to remain light and lack conviction.
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Today's Market Highlights
UK PM Theresa May will go to Brussels this weekend to continue talks with EU Commission President Jean-Claude Juncker on the draft Brexit agreement. The UK PM on Thursday said that the deal was ‘within our grasp’ and that it fulfilled the mandate given to the Government when the UK voted to leave the EU. The Prime Minister’s enthusiasm for the deal was not matched by others who repeated that in its present form that the bill would not pass through the House of Commons, leaving the UK in limbo ahead of the March 29, 2019 leave date. In addition, the Spanish Prime Minister Pedro Sanchez has muddied the waters by saying that he would vote against the proposal unless Spain have a say on the future of Gibraltar. While this vote would not stop the draft agreement going through – the vote is based on a majority decision – it highlights the ongoing friction between the UK and EU as member states pile on the pressure.
The economic calendar is European heavy today with the flash PMIs culminating in the Eurozone flash PMIs at 0900GMT. Consensus expectations has the flash Eurozone Manufacturing PMI to be at 52.0 (in line with October’s final 52.0) whilst the flash Eurozone Services PMI is expected to slip a shade to 53.5 (from October’s 53.7) and flash Eurozone Composite PMI is expected to be 52.0. Canadian inflation for October is at 1330GMT and is expected to be +0.1% (following a drop of -0.4% in September). Flash PMIs continue for the US at 1445GMT where the flash US Manufacturing PMI expected to remain at 55.7 (55.7 in October) with the flash US Services PMI expected to improve a shade to 54.9 (from 54.8 in October).
Today's Economic Calendar