The handshake between Theresa May and Jean-Claude Juncker in Brussels, early in the morning, paves the way for the start of the second round of Brexit negotiations. As a result, the Pound hit a six-month high against the Euro, with traders being optimistic about the future of the relations between the EU and the UK. The British Prime Minister and the President of the European Commission (EC) announced that there has been a deal regarding citizens’ rights, the divorce bill and the Irish border problem. Michel Barnier, the chief EU negotiator said that citing a Brexit bill figure now would create political controversy, adding that the total amount of money required would depend on future developments.

The President of the EU Council, Donald Tusk, noted that more clarity will be needed on how the UK sees future relations with the European side, after it leaves the single market and the customs union. Tusk stressed that there is only one year more to negotiate. Chancellor Philip Hammond said that the deal in Brussels will boost the UK’s economy. The DUP leader, Arlene Foster, claimed that she secured six substantive changes to the deal’s text and expressed the opinion that there are still matters that need clarification.

Pound Sterling – UK Markets

Today, the Pound inched lower against the US Dollar with the exchange rate set at $1.34. Sterling surged against the Euro, hitting a six-month high with the exchange rate reaching the €1.15 mark, before retreating to a lower level. Data regarding the UK’s trade balance, industrial and manufacturing production were published, but they were overshadowed by the breakthrough achieved in the Brexit negotiations.

Theresa May, standing next to Jean-Claude Juncker in a press conference in Brussels, said that the negotiations weren’t easy for any of the two sides, and compromises were made to help strike a deal. May stressed that moving on to talks on future trade with the EU provides clarity and certainty to businesses in both sides of the Channel. The British Prime Minister noted that the financial settlement will be fair for the British taxpayers. Regarding the Irish border problem, May told reporters that “we will guarantee there will be no hard border.”

UK industrial production increased by 3.6% in October on an annualised basis, beating City analysts’ expectations. On a month-to-month basis, industrial production was flat in October. Manufacturing production rose by 3.9% on a year-to-year basis, and by 0.1%, on a monthly basis with both figures being in line with expectations. Total trade balance deficit in October increased to £1.4bn, instead of the anticipated £3bn.

US Dollar – US Markets

The US Dollar strengthened against the Euro with the exchange rate set at €0.85. The US Dollar Index (DXY) gained ground coming in at 93.94. During the afternoon, data regarding nonfarm payrolls, earnings and the unemployment rate will be published.

A Wall Street Journal article said that in November’s report there will be a clearer picture of the state of labour market. Experts suggested that the hurricane effect in job creation, observed in October, should be evaporated by now. They believe that the survey by the Department of Labour will indicate a bounce in wage-growth figures as the economy is getting back on track after suffering from extreme weather phenomena. The unemployment rate is expected to remain stable at 4.1%, which is a seventeen-year low.

Canadian Prime Minister Justin Trudeau noted that, if negotiations for updating the North American Free Trade Agreement (NAFTA) fail, he will consider having one on one talks with the US on trade. Trudeau, who failed to launch free-trade talks with China in previous days, stressed that the NAFTA treaty needs to be updated and a potential cancellation would harm the Canadian economy. President Trump has threatened to scrap the treaty, if the other two members don’t accept the US proposals.

Euro – European Markets

The Euro dropped against the US Dollar with the exchange rate set at $1.17. News are dominated by the breakthrough in Brexit talks early in the morning.

Jean-Claude Juncker, the president of the EC, told reporters that the EU side is ready to begin work on the second phase of Brexit negotiations immediately. Juncker said that the result of the first round of negotiations included compromises and added that he hopes EU leaders will agree in the upcoming Summit with the Commission’s assessment that sufficient progress has been made.

In Germany, the trade balance surplus in October shrunk to €19.9bn, more than analysts were expecting. Exports in October declined by 0.4%, on a month-to-month basis, instead of rising by 1.0%. Imports grew by 1.8% in the same time period, surpassing expectations for a 1.1% growth. In France, industrial output in October rose by 1.9%, surprising analysts who were expecting a minor 0.1% decline. The French government budget deficit increased to €77.2bn.

Other Currencies – Highlights

Sterling inched higher against the Australian Dollar, trading at 1.79 AUD. Westpac’s chairman Lindsay Maxsted said that the deterioration of the banking industry’s reputation has been a great disappointment. Maxsted noted that the financial sector failed to meet customer expectations in recent years. Westpac’s chairman stressed that he hopes the newly announced Royal Commission will play a role in restoring trust.

The Pound fell against the New Zealand Dollar, trading at 1.97 NZD. A Westpac report suggested that net population growth from migration will fall from over 70,000 per year to around 10,000 by 2021. The survey said that the decline in population growth will reinforce downward pressure on house prices. Westpac analysts said that “in some regions, slower population growth could mean that construction levels fall over the coming years.”

Sterling edged up against the Czech Koruna, trading at 29.40 CZK. The governor of the Czech central bank (CZB) said that the bank considers raising its benchmark interest rate by 0.25% every six months.