GBP has come to life over the past 24-hours with the apparent ‘deadlock’ broken by a Handelsblatt article after the European close yesterday suggesting Barnier may still offer the UK a 2-year transitional deal. Whether or not this materialises is yet to be seen and to think this is big step forward I believe would be an error in judgement. The state of the situation does mean that delivering an interest rate hike in November looks difficult if not unlikely as concerns of future economic confidence are clouded by the on-going lack of clarity.
Looking elsewhere, it’s has been fairly quiet as market participants await what is arguably the most important day in terms of economic data releases. The headline act will be the latest CPI readings with it being such a source of concern and influence for decision making at the Federal Reserve. Analysts at Deutsche Bank note that the headline CPI should get a boost from gas prices post the hurricane disruption (market consensus 2.3% Prev. 1.9%) so to be careful of misinterpreting this part of the release, and as ever the core reading will need to be watched closely. The supporting cast is made up of US Retail Sales and the preliminary reading of University of Michigan Sentiment so hopefully the week can finish with a flurry of activity.
Finally, the speak slate is busy once again with ECB Vice President Constancio speaking at 1515BST, with FOMC voters Evans, Kaplan and Powell all due throughout the afternoon. On the earnings front Bank of America and Wells Fargo take the baton from the first banks reports issued yesterday and more information on expectations can be found HERE.
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