Everyone’s attention is on the Italian city of Florence where Theresa May is going to deliver a speech on the future relationship between Great Britain and the European Union (EU). Media sources said that she will urge the two sides to be creative and to work hard for the success of the Brexit negotiations, which have stalled. May is expected to say that the UK will continue contributing to the EU budget, during a two-year transition period, after 2019, in exchange for single market access.

The Eurozone’s economy continues to give positive signals to investors. Data published by IHS Markit showed that the manufacturing and services sector in Germany, France and the Eurozone as a whole, expanded with a strong pace. An ING report said that the Eurozone’s economy is in strong shape and suggested that the economic environment allows the European Central Bank (ECB) to announce the unwinding of its asset-purchase programme.

In Asia, stocks fell as North Korea threatened to test a nuclear bomb in the Pacific Ocean. The Japanese Yen and the Swiss Franc got a boost, since they are considered safe-havens, while the US Dollar dropped.

Pound Sterling – UK Markets

Today, the Pound weakened against the US Dollar with the exchange rate at $1.35. Sterling edged lower against the Euro with the exchange rate at €1.13.

Theresa May will deliver a speech about the future of Britain out of the EU today in Florence. May will take the opportunity to say that all leaders involved should be “imaginative and creative about the way we establish this new relationship.” Some reports suggest that the prime minister will offer to make regular contributions to the EU budget for an additional two-year transition period, in return for access to the single market.

The chief EU negotiator Michel Barnier is in Italy for talks with the Italian prime minister Paolo Gentiloni. Neither he nor any other EU leader, technocrat or official is going to attend May’s speech in the beautiful city of Florence; the birthplace of Niccolo Machiavelli. “If you want an agreement, time is pressing. The Treaty on EU provides for a two-year period to negotiate the withdrawal. We have a useful year to find an agreement as soon as possible on the principles of an orderly withdrawal,” said Barnier, who also warned the British government that there will be no transition period if there is no deal.

US Dollar – US Markets

The US Dollar fell against the Euro with the exchange rate set at €0.83. The US Dollar Index (DXY) also fell, coming in at 91.88. The US currency lost value on news that North Korea is threatening with another nuclear-bomb test.

Fears of war revived when the North Korean foreign minister Ri Yong-ho said that his country may respond to President Trump’s threats with testing a new nuclear weapon in the Pacific Ocean. Ri told journalists that “it could be the most powerful detonation of an H-bomb in the Pacific. We have no idea about what actions could be taken as it will be ordered by leader Kim Jong-un.” Ri will speak in front of the United Nations (UN) General Assembly during the weekend.

This wasn’t the end for the brawl between North Korea and the US. In a statement, Kim Jong-un attacked Donald Trump by calling him “mentally deranged” and threatened him with severe consequences for threatening North Korea. This is the first time that a North Korean leader issues a statement and publicly reads it out.

Euro – European Markets

The Euro jumped against the US Dollar with the exchange rate set at $1.19. The single market currency strengthened when a series of data coming from the Eurozone, confirmed that its economy is performing well.

IHS Markit published its September Services and Manufacturing PMI data for a series of Eurozone countries. The results surpassed expectations. Regarding the Eurozone, the Composite PMI, meaning Manufacturing plus Services, came in at 56.7, a much better reading than the 55.5 expected. Economists at Markit said that the Eurozone’s private sector accelerated in September and suggested that the bloc’s economy expanded in the third quarter of the year by 0.7%.

Germany’s manufacturing PMI hit 60, an outstanding result which indicates that the manufacturing sector grew at the fastest pace in six and a half years, the first month of autumn. The German services sector figures also beat market expectations. The French figures may not have been as strong as Germany’s, but they were above those expected and stressed the good condition of the French economy. A strong growth output was recorded, with new orders hitting a six-year high in September.

Other Currencies – Highlights

Sterling dropped against the Australian Dollar, trading at 1.70 AUD. The Australian Bureau of Statistics (ABS) published its latest jobs figures, which showed that 130,000 Australians found work in the healthcare sector in the past year. The figure surpassed the number of those who found work in construction and professional services. The ageing population and a construction boom seem to have created career-making trends.

The Pound fell against the New Zealand Dollar, trading at 1.85 NZD. Westpac analysts suggest that the Reserve Bank of New Zealand (RBNZ) is highly unlikely to change its monetary policy in the next week’s meeting because of election uncertainty. They believe that interest rates will remain unchanged, but they stress that, in time, the RBNZ will have to reduce its GDP and house price forecasts.

Sterling dipped against the Japanese Yen, trading at ¥151.85. Bloomberg sources revealed that the Japanese snap election date is set for 22nd October. The Japanese Prime Minister Shinzo Abe is going to hold a press conference on Monday afternoon.