Brexit Bill Looms for Theresa May
The 4th December will probably be one of the dates that Theresa May will never forget. Until the end of that day, she should make a new offer to the European Union leaders regarding the Brexit bill and the Irish border. Donald Tusk warned her that, in case a new offer isn’t made, the EU side won’t be able to proceed to the second round of talks after the EU Summit. Liam Fox already replied that the UK won’t discuss anything regarding borders with Ireland, unless trade talks start.
In Europe, Angela Merkel’s CDU party will negotiate with the Social Democrats (SPD) about forming a coalition government. During last week, talks between the CDU, the Greens and AfD collapsed, spreading fears about a new election procedure. The CDU and SPD have been allies in two of the last governments that Merkel was in charge.
Pound Sterling – UK Markets
Today, the Pound strengthened against the US Dollar with the exchange rate set at $1.33. Sterling also edged up against the Euro with the exchange rate set at €1.11. The absence of any important economic data release today brings in the spotlight the Brexit negotiations and the future of British industry.
Business secretary Greg Clark will reveal today UK’s new Industrial Strategy, which would help the British economy face problems deriving from Brexit such as low worker productivity and lack of strong growth. Clark said that “it’s especially important to provide as much clarity as we can about what the fundamentals of our business environment are going to be.” Taking advantage of the finalisation of a deal regarding the establishment of a Merck research facility in the UK, Clark stressed that, in the next weeks, more new deals are going to be announced as a result of the government’s business development strategies.
The President of the European Council, Donald Tusk, warned Theresa May that she can come up with a new offer, regarding the Brexit bill and the Irish border, until the 4th December. Tusk said to the British prime minister that if she doesn’t offer credible solutions to those problems, the EU side won’t be moving to the second phase of negotiations. The 4th December is an important day, as May has already planned a meeting on that day with Jean-Claude Juncker, the president of the European Commission (EC). However, Liam Fox, talking on Sky, said that there will be no decision concerning the Irish border before talks between the EU and Britain move on to trade.
US Dollar – US Markets
The US Dollar fell against the Euro with the exchange rate set at €0.83. The US Dollar Index (DXY), which measures the strength of the Dollar against six major currencies, also fell coming in at 92.60, which is a two-month low. The most important event of the week will be the preliminary GDP data for the third quarter of 2017, due to be released on Wednesday.
Goldman Sachs economists warned in one of their reports that New York City is on the verge of losing some of its most wealthy residents if the currently debated tax reform bill becomes law. Economists forecast that the number of top-income earners in NYC might be reduced by 2%-4%. They also suggest that the proposed restriction of property-tax deductions will make house prices across the US decline by 1%-3%. The report concludes that “these changes could create additional fiscal challenges for the high-tax areas.”
OPEC and non-OPEC producers will be meeting in Vienna on Thursday to decide on oil output policy. OPEC members are likely to extend their production cutting deal with other crude oil exporters. The deal’s renewal will be reducing the total oil production by 1,8m barrels per day for the whole next year. However, some oil traders are afraid that if oil prices move high too quickly, this might act like a wake-up call for US shale oil producers to come back to the market
Euro – European Markets
The Euro gained ground against the US Dollar with the exchange rate set at $1.19. Earlier in the morning, the Euro had hit a two-month high against the US currency.
Angela Merkel and her political party (CDU) are ready to enter talks on forming a coalition government with the Social Democrats (SPD). Merkel has collaborated with the SPD for her two out of three terms as a Chancellor. Angela Merkel told CDU leaders in Berlin, during the weekend, that the two parties have worked well together in the past. The SPD demands higher pensions and income tax cuts for low earners. Merkel has said in the past days that a potential government ally would have to support pro-business policies and a balanced budget.
Benoit Coeure, one of the members of the European Central Bank’s board said that “fake financial data” is as dangerous as “fake news.” The French economist noted that poor quality data can be responsible for fuelling economic manias and panics. Coeure stressed that, in the past, traditional statistical data sets and models sometimes proved inadequate to support the decision-making process of the Eurozone’s central bank, but noted that considerable progress in analysis has been made in the last years.
Other Currencies – Highlights
Sterling dipped against the Australian Dollar, trading at 1.74 AUD. Westpac analysts wrote in a report published today that the Australian economy stepped up a gear in 2017, but added that they expect a slowdown during next year. They suggest that, in the next year, a fall in house building activity and a simultaneous slowdown in China are going to affect the economy.
The Pound lost ground against the New Zealand Dollar, trading at 1.93 NZD. The Reserve Bank of New Zealand (RBNZ) released data which showed that, despite the fall in overall mortgage borrowing, first home buyers are still active in the market. Lending rates in September and October indicated that investors and people who already own a house borrowed less money than any other month since August 2015.
Sterling dropped against the Swiss Franc, trading at 1.30 CHF. Switzerland’s employment level increased in the third quarter of the year to 4.956m. from the 4.915m. figure recorded in Q2, indicating that the Swiss labour market is strong.