Pound Steady as Brexit ball in Labour & EU’s court

The pound held steady below $1.29 as investors continue to digest Brexit developments from the previous session and as they await further news from the EU over the length of the Brexit extension. The pound is on pause as investors await the next chapter of this ongoing drama. Boris Johnson could try to push his Brexit deal through at a slightly slower pace or we could be looking at a general election, should the opposition feel secure once the extension is in place. Which route is taken will depend to a degree on the length of the Brexit extension granted by the EU. A short extension simply doesn’t allow for an election. It will also depend on Labour’s belief in its ability to win an election.

Eurozone consumer sentiment weakens, euro lower

The euro slipped versus both the dollar and the pound following weaker than forecast consumer sentiment data. Consumer confidence dropped to -7.6 in September, down from -6.5 the month previous. Household sentiment is at the lowest level of the year just as the holiday season approaches. This doesn’t bode well for consumption and more broadly the eurozone economy. The data is fuelling concerns that the slump in manufacturing is starting to spread into the consumer sector, spelling more trouble ahead.

The weaker eurozone shows that the eurozone consumer is not taking heed from recent trade developments between the US and China, as the two sides work towards a phase 1 trade agreement.

ECB up next

Knowing that consumer sentiment is deteriorating euro trades will look cautiously ahead to tomorrow’s pmi figures. Expectations are for a slight uptick in activity across the board. Investors will be keen to see whether the slowdown has bottomed out ahead of the ECB monetary policy announcement tomorrow.

The ECB meeting is the final meeting with Mario Draghi at the helm before Christine Lagarde takes over in November. The ECB cut overnight interest rates and restarted its bond buying programme in September. No action is expected from tomorrow’s meeting. Draghi leaves behind hi a deeply divided central bank. It will be up to Christine Largarde to utilize her political finesse to mend those ravines and to encourage more fiscal spending from those eurozone economies that can.