Theresa May is going to ask Labour and the other political parties to help her form policy proposals that will shape the UK post-Brexit, in a speech tomorrow. May will challenge MPs to come forward with new ideas for tackling the new challenges that have come up. Her critics suggest that the Conservatives have just ran out of ideas and that the Prime Minister now realises the weakness of her government, which is based on the support of the DUP.

Furthermore, in the Brexit front, several members of the European Parliament (EP) seem to consider vetoing Theresa May’s offer on EU citizens’ rights, saying that it will create a second-class citizenship in the UK. In a letter published by some European newspapers, the MEPs added that May’s proposal is in contradiction with the “Vote Leave” manifesto, which promised to treat EU citizens “no less favourably than at present.”

Pound Sterling – UK Markets

Today, Sterling dropped against the US Dollar with the exchange rate set at $1.28. The British Pound lost small ground against the Euro, trading at €1.12.

The absence of economic data releases today has shifted investors’ attention to the UK labour market report due to be published on Wednesday. ING’s research analysts suggest that the report will come as a disappointment to the BoE’s Monetary Policy Committee members who are in favour of an interest rate hike in the next months. They believe that job gains will remain resilient, but they expect that there will be recorded a slowdown in wage growth to 1.8%. Tomorrow, the BoE’s Deputy Governor Ben Broadbent will deliver a speech, in which he will probably stay aligned to the idea that discussions over a rate hike should start in 2018.

The Federation of German Industries (BDI) and the Confederation of German Employers’ Association, during the weekend, expressed the opinion that it is the responsibility of the British government to limit the Brexit’s damage on both sides of the Chanel. David Davis had said, a few weeks ago, that the German industry would press the German Chancellor, Angela Merkel, to hand Britain a good deal in order of their exports not being disrupted.

US Dollar – US Markets

The US Dollar strengthened against the Euro, trading at €0.87. The US currency seemed to consolidate its position as data published by the US Bureau of Labour Statistics appeared to strengthen market expectations of a third interest rate hike by the end of the year.

Non-farm payrolls (NFPs) rose in June by 44,000 jobs, above the consensus estimate, but unemployment went up slightly by 0.1% and the wage growth was minimal. However, some investors believe that the lag in wage increases could limit the extent of the Fed’s aggressive stance towards its monetary policy.

An ING report says that strong US jobs growth should, eventually, translate into higher wages. ING analysts suggest that the third interest rate hike will occur in September, with a further two rate hikes next year, as the Fed will be shrinking its balance sheet. Fed’s Chair, Janet Yellen, will speak in Congress on Wednesday and Thursday with experts waiting her comments on the timing of the balance sheet reduction programme.

Euro – European Markets

The Euro to US Dollar exchange rate moved downwards, set at $1.13. Eurozone finance ministers are meeting today in Brussels to discuss the Eurozone’s fiscal stance for 2018 and matters regarding banking and national insolvency rules.

Germany’s exports recorded a fifth consecutive monthly rise, jumping by 1.4% in May, while imports rose by 1.2%. The readings surpassed the expectations of market analysts. On an annualised basis, Germany’s exports increased by 14.1%, while imports rose by 16.2%. The Deutsche Bundesbank’s report indicated that Germany ran a trade surplus, not only with the European Union countries, but also with the rest of the world. A deficit in services was covered by the surplus of exporting goods.

Germany has been criticised severely by the US president Donald Trump for its surpluses. Trump has accused the German government that it takes advantage of the weak Euro. ING economists noted that, despite the protectionist stance from Trump’s administration, German exports to the US have not suffered; on the contrary, almost 9% of them goes to the other side of the Atlantic.

Other Currencies – Highlights

Sterling edged up to the Australian Dollar, trading at 1.69 AUD. According to information from the Australian Financial Review, the Australian steel and aluminium are set to be exempt from US import tariffs. The Australian prime minister Malcolm Turnbull and the finance minister Mathias Cormann seem to have convinced Donald Trump to make an exception for the Australian commodities, which can be considered a success in a time that other exporters are facing the possibility of an US anti-dumping trade wall for imports.

The Pound gained some ground against the New Zealand Dollar, trading at 1.77 NZD. Analysts at ANZ suggest that since New Zealand has the highest interest rates among the G10 and investors are attracted by them, the Kiwi may face problems when the ECB and the BoE decide to hike their benchmark interest rates. However, as the analysts note, the country’s strong economy is expected to mitigate any shift in the Kiwi’s fortune.