Spooky goings on with Brexit

Today's Highlights

• Will we finally pass between worlds with Brexit on the spookiest day of the year?

• Situation Normal in Eurozone and USA as interest rates remain on hold

• US keeps interest rates on hold, too - for now

 

Current Market Overview

Spooky...

Earlier this morning, the UK was given an extension to Brexit proceedings until 31st October. Voices from across the EU made it clear that extending for longer would have been more popular, while French President, Emmanuel Macron, was vocal about a shorter delay. In the end, they managed to reach a compromise.

Will we get a deal now?

Incredibly, it is thought that Prime Minister May still believes it may be possible for the UK to leave the EU before the middle of May 2019, to avoid taking part in the European elections. The EU has made it clear that the withdrawal agreement is the only deal on the table, though, and is adamant that there will be no revisions, so it is difficult to see how Mrs May’s current deal will garner enough support within UK Parliament.

What does it all mean?

This new extension does throw up the possibility of a number of political issues. There could be a general election or even another referendum before the new leaving date, for example. This heightened uncertainty could weigh on the Pound, which has struggled to strengthen on the news.

Situation normal in the Eurozone as interest rates left unchanged

In other news, the European Central Bank (ECB) met yesterday and the Euro remained largely unchanged after they left interest rates on hold and reiterated that they planned to leave them on hold for the rest of the year. They remained downbeat on the economic outlook for the Eurozone, although ECB Chief, Mario Draghi, did not elaborate on specific plans around the long term monetary policy. They indicated that the chance of a recession in the Eurozone is thought to be low, however, the ECB is ready to offer support if necessary.

US keeps interest rates on hold – for now

In the US, the Minutes from the latest Federal Open Market Committee (FOMC) meeting showed a unanimous vote to keep rates the same. It’s also unlikely that rates will change before the end of the year, although they were clear that they could increase interest rates if the economic indicators were favourable. It seems that the Federal Reserve is taking a ‘wait and see’ approach, given mixed messages on the economy and disappointing US data recently. So there is a chance that US interest rates could go up later this year.

Chinese data on Friday key for currency markets

Given the US-China trade tensions and talks, the Chinese trade data that is due to be released on Friday will be watched very closely by the US and other global economies to set the scene for the road ahead. The Chinese data results also have the power to move a number of currencies, particularly the commodity currencies.

There is little tier one economic data due to be released today, so, as usual, the market focus will be on any rhetoric emanating from politicians around Brexit developments and any other geopolitical tensions across the globe. More uncertainty, more watching and waiting…