What’s been happening?

Pound Sterling – UK Markets 

The British pound stayed relatively calm on Wednesday and recorded small losses against both the dollar and the euro. Following her meeting with the European Commission President Juncker, British Prime Minister Theresa May said that progress had been made during discussions and they would continue to work on the outstanding issues and announced that she will return to Brussels on Saturday for another round of talks. Meanwhile, in an essay published in The Guardian, the leader of the Scottish National party, Nicola Sturgeon, argued that there was almost certainly no Commons majority for May’s proposed deal and there was most definitely no parliamentary backing for no-deal. “My first preference, of course, along with that of my government and party, is for us to remain in the European Union, which is what the people of Scotland voted for overwhelmingly. That could still be achieved by a so-called people’s vote,” Sturgeon wrote. 

Spanish Foreign Minister Borrell on Tuesday said that they wanted to keep the negotiations on Gibraltar separated from the main Brexit talks and repeated that Spain would vote against the deal if the text on Gibraltar was not amended. Commenting on that issue, German Chancellor Angela Merkel said that they didn’t yet know how to solve Spain’s objections on the deal. “There is a difficult problem in the Brexit agreement. That is the issue of the Irish border. Exit agreement must be signed at Sunday Summit,” Merkel added.

US Dollar – US Markets

The US Dollar Index, which measures the dollar’s value against a basket of six major currencies, finished the day virtually unchanged amid thin trading volume ahead of the Thanksgiving holiday. The weekly report published by the U.S. Department of Labor on Wednesday showed that the initial jobless claims rose to 224,000 in the week ending November 17. Additionally, the U.S. Census Bureau announced that new orders for manufactured durable goods in October decreased $11.5 billion, or 4.4%, to $248.5 billion compared to analysts’ expectation for a 2.5% decline. “Excluding defence, new orders decreased 1.2%.” 

The final reading of the University of Michigan’s Consumer Confidence Index fell to 97.5 in November from 98.6 in October and fell short of the market forecast of 98.3. Commenting on the sentiment survey, “Consumer sentiment has remained largely unchanged at very favourable levels during 2018, with the November reading nearly at the centre of the eleven-month range from 95.7 to 101.4. Although the data recorded a decline of 2.8 Index points following the election, the drop was related more to income than a political party,” Surveys of Consumers chief economist, Richard Curtin, said. The last data of the day from the U.S. revealed that existing home sales increased by 1.4% in October after falling in the previous six months.  

Euro – European Markets

Ahead of the European Commission’s decision on Italy, the spread between the 10-year Italian government bond yield and its German counterpart rose to its highest level in more than five years at 327 basis points to show that markets continued to price the expectation of the EC rejecting the budget proposal. In an interview with Il Sole, Italy's Finance Minister Giovanni Tria said that he was concerned about the widening yield spread. Although La Stampa earlier in the day reported that the Italian Deputy Prime Minister Salvini was open to budget revisions, Salvini later told reporters that the 2.4% deficit target was non-negotiable. 

Later in the day, the EC announced that it rejected Italy’s spending plan for 2019 in a widely anticipated decision. “Our analysis suggests that the debt rule must be considered to have not been respected. We conclude that the opening of a procedure for excessive deficit based on the debt is therefore justified,” the Commission said in an official statement. However, this development didn’t have a notable impact on the markets and the shared currency stayed unchanged vs the greenback on a daily basis. 

What’s coming up? 

UK: There won’t be any macroeconomic data releases from the UK. Markets will be paying a close attention to Brexit headlines.

US: Thanksgiving day holiday in the United States.       

EU: The European Central Bank will publish the minutes of the November monetary policy meeting. Later in the day, the European Commission will release preliminary consumer confidence data.