What’s been happening?

Pound Sterling – UK Markets 

The British pound’s value fluctuated wildly on Wednesday amid a barrage of Brexit headlines. During the Cabinet meeting, news outlets reported that British Prime Minister Theresa May had cancelled the scheduled press conference and caused no-deal Brexit fears to escalate. Clarifying these reports, May’s office confirmed that there wouldn’t be a press conference and the PM would deliver a short statement. Although this development helped the currency recover its losses, BBC’s political editor Laura Kuenssberg’s tweet that read "Senior tory tells me Brexiteer anger so high that seems likely there will be a call for a no-confidence vote tomorrow - letters going in," put the pound sterling back under pressure. 

However, in her brief statement later in the day, PM May announced that she had the Cabinet’s support and added that this deal would deliver on the vote of the referendum to allow the currency to start gathering strength vs its peers. The draft Brexit agreement highlighted that the UK would commit to avoiding hard border, including any physical infrastructure or related checks & controls in N.Ireland. With the Cabinet backing her plan, PM May will be discussing the deal with the Parliament on Thursday.

Assessing the draft text, “While today's announcement of an agreement represents a positive step on the path to a negotiated Brexit, it is far from the end of the process,” Moody’s said. “Developments in the UK Parliament will be critical, and ultimately the value of the withdrawal agreement hinges on whether Prime Minister May can persuade a majority of MPs to support it in a parliamentary vote.”

Meanwhile, according to the UK’s Office for National Statistics (ONS), the Consumer Price Index (CPI) in October rose 0.1% and 2.4% on a monthly and yearly basis, respectively, to match September’s reading and miss the analysts’ estimates by a small margin. The annual core-CPI, which excludes volatile food and energy prices, meanwhile, remained steady at 1.9%. “The large downward contributions to the change in the 12-month rate from food and non-alcoholic beverages, clothing and footwear, and some transport elements were offset by upward contributions from rising petrol, diesel and domestic gas prices,” the ONS noted. Further details of the publication revealed that the Retail Price Index (RPI) stayed unchanged at 3.3% in 12-months to October and the Producer Price Index (PPI - input) came in at 10% to surpass the experts’ forecast of 9.6%.  

US Dollar – US Markets

The U.S. Bureau of Labor Statistics on Wednesday reported that the Consumer Price Index (CPI) in October rose 0.2% and 2.5% on a monthly and yearly basis, respectively. Furthermore, the annual core CPI, which strips energy and food prices, increased by 2.1% to fall short of the market expectation of 2.2%. Nevertheless, these readings didn’t impact the probability of a December rate hike, which according to the CME Group FedWatch now stands at 73%. With no other macroeconomic data releases from the U.S., the greenback struggled to stay resilient against the euro and the British pound and the US Dollar Index fell for the second straight day.

Euro – European Markets

The data published by the Eurostat on Wednesday showed that the real GDP growth (preliminary) in the euro area stayed unchanged in the third quarter at 0.2% and 1.7% on a quarterly and yearly basis, respectively. A separate report revealed that industrial production contracted by 0.3% in October and the employment change came in at 1.3% in the third quarter to fall short of the market expectation of 0.4%. On the other hand, the Destatis announced that the real GDP in Germany contracted by 0.2% (preliminary) in the third quarter and the annual growth rate fell to 1.1% from 2% recorded in the second quarter. Reflecting the disappointing economic performance, Germany's central bank, Bundesbank (Buba), in its monthly report said that risks to the future activity were skewed to the downside and the probability for a sharp downturn had increased exposing vulnerabilities. 

Meanwhile, commenting on the euro area data, Dutch central bank governor and ECB member Klaas Knot told CNBC that the impact of the economic slowdown was not enough to change the outlook at this point and added that there were downside risks on the horizon. 

What’s coming up? 

UK: Retail sales, which is expected to increase by 0.2% on a monthly basis in October following September’s 0.8% fall, will be the only data featured in the UK economic docket on Thursday. Later in the day, the BoE’s MPC member Silvana Tenreyro will be delivering a speech.

US: The U.S. Census Bureau will release retail sales figures alongside with weekly initial jobless claims and import/export price index data. Both the Federal Reserve Bank of New York and Philadelphia will be reporting the findings of their regional manufacturing surveys.       

EU: The Eurostat will publish September trade balance figures. ECB members Praet and Coeure are scheduled to speak on Thursday as well.