What’s been happening?

Pound Sterling – UK Markets 

The British pound stayed relatively calm on Monday and recorded small gains against the greenback while staying weak vs the euro as markets are assessing the headlines on a possible leadership challenge and waiting for the meaningful vote on the draft Brexit deal. Junior finance minister Robert Jenrick told the Parliament that they will be publishing a report that consists of forecasts comparing Prime Minister Theresa May's Brexit deal against remaining in the European Union ahead of the Parliament vote. The only data from the UK on Monday showed that the Rightmove House Price Index declined 1.7% on a monthly basis in November following October’s 1% increase.  

On Monday morning, Scottish constitution minister, Michael Russell, “It seems clear the UK Government’s deal will be defeated in the House of Commons and therefore we will do everything in power to ensure a common-sense alternative is in place.” told the Joint Ministerial Committee (EU Negotiations). Meanwhile, according to The Sun, the count of letters to challenge Theresa May’s leadership was at 42, 6 short of the needed 48 to trigger a no-confidence vote. Similarly, Tory lawmaker Simon Clarke told Reuters that it was now almost certain to have a no-confidence vote on Tuesday and added that the DUP wouldn’t support the current plan. Additionally, in an interview with Bloomberg, former Brexit secretary David Davis repeated that he expected the Parliament to vote down May’s deal. 

US Dollar – US Markets

With major equity indexes extending their slide and US Treasury bond yields falling on higher demand for safer assets, the dollar came under pressure on Monday and weakened against its rivals. The US Dollar Index, which measures the USD’s value against a basket of six major currencies, fell to its lowest level since November 8.

New York Fed President Williams said that he expected the FOMC to continue gradual tightening towards more normal rates in December, but added that the Fed was not on a pre-set policy course. Although recent remarks from Fed officials haven’t hurt the expectations for a rate hike in December significantly, some experts see the dot plot to show a more dovish outlook for 2019. Meanwhile, the National Association of Home Builders on Monday reported that the Housing Market Index fell to 60 in November from 68 in October to miss analysts’ estimate of 67 by a wide margin. 

Euro – European Markets

The shared currency rose against both the dollar and the pound sterling on Monday. However, the currency’s gains are likely to stay limited in the near-term as the widening gap between Italy and Germany suggests that markets are still worried about the Italian budget crisis. According to Ansa News Agency, Italy's deputy prime minister Luigi Di Maio said that he was not worried about the possible EU proceedings on the budget proposal. Meanwhile, delivering his comments on the European banks’ stress test, the European Central Bank’s (ECB) Banking Supervision Head Danièle Nouy stated that there was no need for recapitalization. On rising Italy-Germany bond yield spreads, “Italian spreads unwelcome development for banks, but it is not last time we face this kind of scenario,” Nuoy added. Later in the day, Italian Economy Minister Tria explained that the bond yield spread had no influence on the intention of the deficit target and reiterated that Italy’s plans on the budget would not change.

The data published by the ECB on Monday showed that the current account surplus (seasonally adjusted) fell to €17 billion from €24.3 billion reported in August. Moreover, the Eurostat announced that the construction output increased by 2.04% in September after contracting 0.5% in the previous month.

What’s coming up? 

UK: The BoE will publish its Inflation Report on Tuesday and Governor Mark Carney will deliver his prepared statement. Furthermore, the CBI will publish its Industrial Trends Survey (orders) for November.

US: Building permits and housing starts will be the only data featured in the US economic docket on Tuesday.       

EU: Destatis will release the Producer Price Index (PPI) figures from Germany.