EU Press UK for Brexit Concessions
The Pound dropped against the US Dollar and the Euro as senior European Union (EU) officials warned the British government that, unless Theresa May makes some concessions, it would be difficult to agree on starting the trade talks in December, at the EU leaders’ summit. A document leaked to the media showed that the EU believes it would be impossible to strike a trade deal with the UK by March 2019. A report by the Bank of England (BoE) said that weaker investment growth in the next two years should be expected.
President Donald Trump, on the first anniversary of his election, will visit China to hold talks with the Chinese political leadership. Main topics will be North Korea and the developments on the peninsula, as well as the trade balance between the US and China. In Europe, the French finance minister, Bruno Le Maire, said that France and Germany should harmonise their corporate tax regimes by the end of 2018. Le Maire stressed that the Eurozone should be reformed if it wants to become an economic force like China and the US.
Pound Sterling – UK Markets
Today, the Pound fell against the US Dollar with the exchange rate set at $1.31. Sterling also edged lower against the Euro with the exchange set at €1.13.
The BoE published its latest Regional Agents’ Survey which said that “expectations of investment growth, in the UK, in the following two years are weaker.” The survey results showed that manufacturing output growth has risen again, with export supply chains supported by the fall in Sterling and some signs of increased domestic sourcing. The BoE also stressed that the demand for houses in London is affected by overvaluation concerns.
IHS Markit’s October report on UK jobs showed that staff appointments increased at the softest pace in the last six months. The report noted that the growth of staff appointments was held back by the uncertain economic outlook and skill shortages. The availability of permanent and temporary workers continues to fall sharply as the unemployment rate has hit a historic low. Markit’s survey mentioned that starting salaries increased in October at the second-quickest rate since November 2015.
US Dollar – US Markets
The US Dollar dipped against the Euro with the exchange rate set at €0.86. The US Dollar Index (DXY) inched lower, coming in at 94.81. The US Dollar hit a four-month high against the Euro yesterday, but suffered losses when a media report suggested that Republicans are considering a one-year delay in the implementation of the corporate tax cut.
President Donald Trump is visiting China today to hold talks with the Chinese President Xi Jinping. Trump is expected to discuss the issue of North Korea and trade with the Chinese leadership. The US President warned North Korea to not underestimate the US in a comment made during his visit in Seoul. Senior White House officials said that the President will ask from China to abide by UN resolutions. The Chinese foreign ministry was quick to respond that “China has fully and strictly implemented UN resolutions on North Korea.”
US Commerce Secretary Wilbur Ross is already in Beijing to be present in the signing of deals between US and Chinese companies, worth around $9bn. Ross noted that the trade imbalance between the two countries will be discussed in the meeting of the two presidents. Ross is facing criticism back in the US for owning shares in a shipping venture associated with Vladimir Putin’s close family members. A representative for Ross said that the secretary is in the process of selling off his holdings in another shipping firm.
Euro – European Markets
The Euro inched higher against the US Dollar with the exchange rate set at $1.16. The single market currency received a boost from September’s positive retail sales data and the confirmation from Mario Draghi that the Eurozone economy grew faster than expected in the first half of the year.
Data published by MINEFA showed that the French trade deficit widened in September, but not so much as it was expected by economists. The customs report said that imports outpaced exports because of reduced overseas sales of agricultural products and industrial machinery. France has been running a trade deficit since May 2004. Another report from the central bank of France noted that the current account deficit increased in September to €-3.1bn.
The Spanish National institute of Statistics released data which indicated that the country’s industrial output increased in September more than expected, despite the unrest in Catalonia. A Rabobank report said that the Eurozone’s economy continues to surprise as the pace of expansion in the second quarter of 2017 was higher than expectations. Rabobank’s economists note that they are likely to revise the economic growth outlook for 2017 and 2018.
Other Currencies – Highlights
Sterling dropped against the Australian Dollar, trading at 1.71 AUD. The S&P/ASX200 stock market index closed above the 6,000-point barrier for a second day on Wednesday. This is the highest level that the S&P/ASX200 index has reached since before the global financial crisis started. Market analysts were uncertain if the rally could continue since as they said, “it is common for markets to test the limits of a trading range.”
The Pound fell against the New Zealand Dollar, trading at 1.89 NZD. The Reserve Bank of New Zealand (RBNZ) board is meeting today to decide on interest rates. Economists expect that the RBNZ will hold interest rates on hold at 1.75%. A BNP Paribas report noted that RBNZ’s fears about currency strength have likely been reduced as the Kiwi lost some value after the result of the parliamentary elections.
Sterling lost ground against the Polish Zloty, trading at 4.79 PLN. The Polish central bank board is meeting today to decide on interest rates. Polish banking sector shares rallied because, as analysts suggest, the economic rebound increased the demand for credits.