May Visits Brussels for Urgent Talks
The Pound strengthened against the Euro and the US Dollar on news that Prime Minister Theresa May and Brexit Secretary, David Davis, will travel to Brussels today to meet Michel Barnier, the appointed European Union (EU) Brexit negotiator, and the president of the European Commission (EC), Jean-Claude Juncker. EU leaders are going to discuss the course of Brexit negotiations in the European Council summit later this week.
Oil prices jumped as Iraqi military forces closed on the city of Kirkuk, which is one of the largest cities in Iraqi Kurdistan and its area is considered one of the richest in oil in the country. Media sources said that there was artillery engagement between the Iraqi army and Kurdish forces. In Spain, a letter by Carles Puidgemont said that he proposes a dialogue between the Madrid government and the regional Catalan government. His answer failed to clarify if he officially declared independence for Catalonia. The Spanish government gave Puidgemont three more days to make the clarification.
Pound Sterling – UK Markets
Today, the Pound strengthened against the US Dollar with the exchange rate set at $1.33. Sterling edged up against the Euro with the exchange rate set at €1.12. The absence of important data releases has made analysts shift their attention to tomorrow’s release of the UK inflation figures for September.
The Pound’s strengthening was assisted by media reports that Theresa May will host a private dinner for the EU Chief Brexit negotiator Michel Barnier, the UK’s Brexit Secretary David Davis and the president of the European Commission, Jean-Claude Juncker. May aims at putting the Brexit negotiations back on the right track, after Barnier said that they reached a deadlock. The dinner will take place in Brussels today, ahead of the European Council’s meeting, which starts on Thursday. EU leaders are expected to discuss the outcome of the negotiations so far and their future plans.
Revised data from the Office for National Statistics (ONS) showed that Britain’s net international investment position has been reduced from a surplus of £469bn in the first six months of 2016 to a net deficit of £22bn in the first six months of 2017. Foreign direct investment (FDI) by companies has taken a hit, dropping from a £120bn surplus in the first half of 2016 to a £25bn deficit in the first half of this year.
US Dollar – US Markets
The US Dollar surged against the Euro with the exchange rate at €0.84. The US Dollar Index (DXY), which measures the value of the Dollar against six major currencies, remained stable at 93.16. The US currency recovered some of the ground lost on Friday when September inflation figures missed expectations.
Janet Yellen, the Fed’s Chair, acknowledged that inflation is surprisingly low adding that “this year’s low inflation could reflect something more persistent than is reflected in our baseline projections.” Yellen spoke in an international banking seminar in Washington and assured that the Fed will pay close attention to inflation data in the next months. She reiterated that she expects gradual interest rate increases to sustain employment and inflation goals.
An ING report said that “it’s too early to make any sweeping assumptions about what particular Fed Chair nominees would mean for the future of Fed policy.” President Donald Trump had said that he would nominate Yellen’s successor around mid-October, but this seems impossible as John Kelly, the White House Chief of Staff, noted that interviews with candidates are still in the first round. Treasury Secretary Steven Mnuchin stressed that he hopes a nomination will be made in November.
Euro – European Markets
The Euro dipped against the US Dollar with the exchange rate set at $1.17. The reason for the Euro’s fall was the political uncertainty in Spain and the latest developments in Catalonia.
Carles Puidgemont, the leader of the regional Catalan government, said in a letter addressed to the Spanish Prime Minister Mariano Rajoy that dialogue between Catalonia and Spain should take place over the next two months. Rajoy had urged Puidgemont to clarify if he officially declared independence of Catalonia during the speech he delivered in the regional parliament last week. Puidgemont’s answer doesn’t provide clarification on the subject. The government in Madrid gave the Catalans three days more to clarify their status.
In Austria, the OVP party led by the 31-year old Foreign Minister, Sebastian Kurz, won Sunday’s parliamentary elections and is expected to start talks with the ultra-right wing FPO party in order to form a coalition government. In Germany, data showed that the wholesale price index in September rose by 0.6%, on a month-to-month basis, surpassing market expectations. Data released by Eurostat showed that the Eurozone’s trade surplus dropped, when compared to a year ago, coming in at €16.1bn. Imports grew by 8.6%. Exports rose by 6.8%.
Other Currencies – Highlights
Sterling gained ground against the Australian Dollar, trading at 1.68 AUD. The highlight of this week in the domestic economic front will be the release of September’s jobs data on Thursday. NAB’s economists suggest that 25,000 new workplaces were added to the economy in the past month. According to them, this number would be sufficient to push the unemployment rate lower.
The Pound inched higher against the New Zealand Dollar, trading at 1.85 NZD. The latest ANZ Residential Property Survey showed that one out of two investors are concerned about meth-contaminated properties. In 2016, 10% of investors had mentioned this as a reason of concern. 47% of the polled real estate investors replied that the limits on high loan-to-value ratio (LVR) lending have significantly impacted their strategy in the last year.
Sterling strengthened against the Hong Kong Dollar, trading at 10.39 HKD. Chief Executive Carrie Lam Cheng Yuer-ngor vowed in her first policy address to nurture the tech industry by devoting 1.5% of Hong Kong’s GDP to research and development in the next five years.