Brexit breakthrough lifts pound and overall sentiment

The pound has gained ground after the EU announced that sufficient progress had been made in Brexit negotiations, paving the way for trade talks to begin. Meanwhile, with housebuilders helped by a positive outlook from Berkeley Group, the FTSE is trying to keep up with its mainland counterparts.

• Housebuilders help FTSE gain ground, while Chinese data helps risk-on mood

• Brexit breakthrough helps boost pound

• US jobs data unlikely to shift sky-high rate rise expectations

European indices are driving higher as we close out the week, with the FTSE trailing their mainland counterparts amid an outperformance in the pound. The FTSE has been helped along by a strong performance across the housebuilders, with an improved outlook from Berkeley Group providing a boost for the likes of Barratt Developments, Persimmon, and Taylor Wimpey. Market sentiment is clearly elevated with the yen and gold driving lower overnight amid a raft of strong Chinese trade figures. Meanwhile, with the markets looking ahead to the latest US jobs data, the dollar index has hit a two-week high in anticipation of a December rate rise.

With the EU adjudging that negotiations with the UK have reached a position where they are sufficient to enable the commencement of trade talks, it comes as no surprise that the pound is a big outperformer this morning. To a large degree this looks like a fudge aimed at enabling progression without actually offering a specific solution to the Irish border issue. By choosing to promise a deal which will please both the Irish (frictionless border) and DUP (full Brexit for Northern Ireland), this issue is sure to raise rear its head at a later date as they figure out how to implement such a deal.

Markets now turn to the US jobs data as the main driver of volatility as we close out the week. With market expectations pointing towards a 98% chance of a December rate rise, we will need something remarkable to shake the overwhelmingly hawkish outlook. Crucially, with the US likely to see a raft of tax reforms implemented, we are likely to see the focus shift from monetary to fiscal policy to support growth.

Ahead of the open we expect the Dow Jones to open 57 points higher, at 24,268.