What’s been happening?

Pound Sterling – UK Markets 

Following their meeting on Friday, British Brexit Secretary Dominic Raab and the EU’s Chief Brexit Negotiator delivered the latest updates in a joint press conference. Raab claimed that despite the fact that there was clearly more work to do, he was optimistic that they could reach a Brexit deal with the EU by October European Council meeting. Barnier, on the other hand, repeated that there would be no deal without a backstop on the Irısih border and added that the future partnership that they envisioned with the UK would be unprecedented. Commenting on the timing of a possible deal, Barnier said that there was a possibility of reaching an orderly deal by October and elaborated further by stating that the deadline was November. The sterling struggled to gather strength against the dollar on Friday but was able to record small gains vs. the euro. 

The report published by Nationwide on Friday showed that the annual house price growth softened to 2% in August from 2.5% in July and fell short of the market expectation of 2.7%. Commenting on the publication, “Looking further ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates. Subdued economic activity and ongoing pressure on household budgets are likely to continue to exert a modest drag on house price growth and market activity this year, though borrowing costs are likely to remain low,” Robert Gardner, Nationwide’s Chief Economist, said.

US Dollar – US Markets

The ISM-Chicago’s PMI slipped to its lowest level in three months at 63.6 in August from 65.5 in July. “The MNI Chicago Business Barometer continues to signal solid business sentiment, despite easing for the first time in five months, with growth in output and demand holding up well,” noted Jamie Satchi, Economist at MNI Indicators. “Inflationary pressures look set to continue, potentially bleeding into consumer prices, with over 60% of firms reporting that they have passed on higher input costs to customers in recent months, and others foreseeing doing so in the near future,” he further explained.

The headline Consumer Confidence Index of the University of Michigan’s Consumer Sentiment Survey improved to 96.2 in its final reading of August from the previous estimate of 95.3. “Although there was a small uptick in late August, consumer sentiment remained at its lowest level since January. Most of the August decline was in the Current Economic Conditions Index, which fell to its lowest level since November 2016. These results stand in sharp contrast to the recent very favourable report on growth in the national economy,” Surveys of Consumers chief economist, Richard Curtin, said. 

The upbeat data from the U.S. and the news of the U.S. and Canada failing to reach an agreement on NAFTA helped the US Dollar Index continue to retrace its weekly losses.

Euro – European Markets

On Friday, Destatis announced that retail sales in Germany declined 0.4% on a monthly basis in July after increasing 1.2% in June and the annual rate dropped to 0.8% from 3%. Markets, however, focused on the macroeconomic data releases from the eurozone and the shared currency weakened against its peers on disappointing inflation figures. 

According to the Eurostat, the euro area seasonally-adjusted unemployment rate matched June’s reading of 8.2% in July and came in line with the market consensus. Other data released by the Eurostat revealed that the euro area inflation was expected to be 2% in August compared with analysts’ estimate of 2.1%. The core-CPI, which strips volatile food and energy prices, also ticked down to 1% in August from 1.1% in July. “Looking at the main components of euro area inflation, energy is expected to have the highest annual rate in August (9.2%, compared with 9.5% in July), followed by food, alcohol & tobacco (2.5%, stable compared with July), services (1.3%, compared with 1.4% in July) and non-energy industrial goods (0.3%, compared with 0.5% in July),” the Eurostat said in its press release.

What’s coming up? 

UK: The only data featured in the UK economic docket on Monday will be the IHS Markit’s Manufacturing PMI.

US: Markets will be closed due to Labor Day holiday on Monday. 

EU: The IHS-Markit will release the Manufacturing PMI for Germany and the eurozone.