May to Reassure Business over Brexit Deal
Today, PM Theresa May is expected to reassure business leaders that she is committed to secure a Brexit transition deal. The Pound is up against both the US Dollar and the Euro.
President Donald Trump is visiting Japan as part of his trip to countries of the Far East. Trump aims to discuss the developments on North Korea and trade with the political leaders of the region. In other news, the so-called “Paradise Papers” are giving Trump’s advisers nightmares. The leaked papers show that the US Commerce Secretary, Wilbur Ross, is still doing business with Vladimir Putin’s son-in-law, Kirill Shamalov. The US Dollar retained its value against the Euro, with the exchange rate set at €0.86.
Pound Sterling – UK Markets
The Pound is up against both the US Dollar and the Euro. It is currently trading at $1.31 and €1.13. The UK economic calendar is relatively calm until Friday, when the UK will release industrial and manufacturing production figures, as well as the latest trade balance.
The biggest news over the weekend that has shocked the world revolves around the publication of the Paradise Papers. The papers, named after the billions of funds which were invested in offshore accounts in such paradisiacal places as the Cayman Islands, reveal that Prime Ministers, Russian oligarchs, corporations, political figures and celebrities have been protecting their wealth in secretive tax havens. The details originate from the company registries of 19 tax havens and two offshore services providers and were leaked by the German newspaper Süddeutsche Zeitung. From the Queen’s private estate investments in a Cayman Islands’ fund to the US President Donald Trump’s cabinet members and advisers’ links to tax havens, including his Commerce Secretary’s offshore ties to Russian President Vladimir V. Putin’s inner circle, the material exposes the greed of the wealthiest. But it also puts pressure on both PM Theresa May and President Trump to fulfil their promises of restraining tax avoidance schemes.
Today, more than 150,000 workers will receive a pay rise since the UK living wage is being increased in line with inflation. The pay rate will rise 3.6% to £8.75 per hour in the UK and 4.6% to £10.20 in London, helping those employees whose companies volunteered to offer UK living wage. The new rates are welcomed by thousands of UK workers who saw their salaries suffer a squeeze and rising inflation. However, 5.5m people are still being paid the national living wage which is considerably less than the real living wage, with many big corporations failing to sign up to the promise of paying the living wage.
In regards to Brexit, according to today’s Chartered Institute of Procurement and Supply (CIPS) survey of company managers, 63% of EU companies are expected to move some of their supply chain out of the UK. The survey of 1,118 supply chain managers and of 106 EU-based businesses with British supply chains, primarily raised concerns about the slow progress of the Brexit negotiations and fears relating to the UK exiting without a transition trade deal.
Today, PM Theresa May is expected to reassure business leaders that she is committed to secure a Brexit transition deal. In a speech to the Confederation of British Industry (CBI), May will stress the importance of a transitional agreement so that businesses do “not face a cliff-edge and…have the time…to plan and prepare for the new arrangements.”
US Dollar – US Markets
The US Dollar retained its value against the Euro, with the exchange rate set at €0.86. The US Dollar Index (DXY), which measures the value of the Dollar against six major currencies, remained stable at 94.93.
President Donald Trump is visiting Japan as part of his trip to countries of the Far East. Trump aims to discuss the developments on North Korea and trade with the political leaders of the region. Delivering a speech in Tokyo, the US President said that he would push Japan for more “reciprocal” trade. “The US has suffered massive trade deficits at the hands of Japan for many years. We have to negotiate,” noted Trump, who added that this would be done in a friendly way. According to data from the US Treasury Department, Japan enjoyed a $69bn trade surplus with the US in 2016.
Leaked documents, nicknamed “Paradise Papers,” show that the US Commerce Secretary, Wilbur Ross, is still doing business with Vladimir Putin’s son-in-law, Kirill Shamalov. Documents show that Ross has retained his holdings, acquired through a chain of offshore investments, in a shipping venture named “Navigator,” even after taking office. The “Navigator” shipping venture is a partner of a Russian gas company called “Sibur,” in which Shamalov is a major stakeholder. A representative for Wilbur Ross said that his holdings wouldn’t be in conflict with his government duties on trade and industry.
Euro – European Markets
The Euro has held steady against the US Dollar today, trading at $1.16. The single market currency slipped against the Pound, exchanging at £0.88, ahead of the release of several Purchasing Manager Indexes (PMIs) today.
Germany’s Markit Composite PMI indicates continued robust growth in both manufacturing and service sectors, although the reading slipped slightly from 57.7 to 56.6. German factory orders beat expectations that they would fall by 1.5%, rising by 1%. This year had been the best period of economic performance for Europe’s largest economy since the financial crisis. The EU Markit Services and Composite PMIs exceeded expectations and investor confidence for November is much higher than anticipated, according to Sentix.
Later today, the 27 Eurogroup finance ministers meet in Brussels to prepare for a leaders’ summit on 15 December. They will discuss three issues that are expected to strengthen the bloc politically and economically so that it is more resilient against future crises, like Brexit. They are taking measures toward creating a unified budget, streamlining the EU’s budget discipline rules and finalising a “banking union” that will eliminate restrictions between lenders across the EU.
Other Currencies – Highlights
Sterling strengthened against the Australian Dollar, trading at 1.71 AUD. The board of the Reserve Bank of Australia (RBA) is meeting tomorrow to decide on interest rates. Westpac analysts suggest that the board will keep interest rates on hold. The RBA’s board is also expected to focus on the developments in residential property markets, with the area of Sydney being on the top of the list.
The Pound jumped against the New Zealand Dollar, trading at 1.90 NZD. On Wednesday, the Reserve Bank of New Zealand (RBNZ) board will be meeting to decide on its benchmark interest rates, which currently stands at 1.75%. ANZ’s commodity price index jumped in October, according to data published by the bank. The index was up to a level last seen in February 2014.
Sterling edged up against the Swiss Franc, trading at 1.31 CHF. Swiss inflation in October remained stable at 0.7%, on a year-to-year basis, despite expectations of moving higher to 0.8%.