
Market Brief: Brexit deal stumbles at Irish border hurdle
11 Sep 2018
Theresa May travelled to Brussels yesterday to secure a deal with Jean-Claude Juncker but her plans were thwarted by Arlene Foster and the DUP.
Today's data release |
Key levels | |||
---|---|---|---|---|
09:00 | UK services PMI | Support | Resistance | |
09:30 | EU composite PMO | GBP/USD | 1.3220 | 1.3550 |
13:30 | US trade balance | GBP/EUR | 1.1070 |
1.1450 |
14:45 | US services PMI |
Market overview
Theresa May travelled to Brussels yesterday to secure a deal with Jean-Claude Juncker but her plans were thwarted by Arlene Foster and the DUP. The deal would have paved the way for the 14/15 December Brexit Summit giving the green light to progress to the next round of negotiations on future trading agreements. The deal breaker proved to be the proposal to work on a basis of ‘continued regulatory alignment’ between Northern Ireland and the Republic, avoiding the need for a ‘hard’ border between the two. This pleased Dublin, but was not an acceptable arrangement for PM May’s DUP partners, who said that it would prevent Northern Ireland from leaving the EU ‘on the same terms’ as the rest of the UK. May is now back in the UK working with her officials to find a compromise, though this is easier said than done with the Irish PM quoted last night saying he is only open to changing the text if the meaning is maintained. Note that Brussels negotiators have said that the timescales for a Brexit deal are now very tight, but they are still not ruling out an agreement at next week’s EU Summit. May is expected to hold further talks with the DUP in the next 24 hours and may travel back to Brussels for further talks as soon as tomorrow.
Sterling was volatile on this news in yesterday afternoon's trading session. It weakened after the news of the failure to reach an agreement. Against the USD, sterling is down at $1.3415, having reached a high of $1.3539 around 12.30pm yesterday.
The British Retail Consortium published figures showing that sales had risen 0.6% YoY on a like-for-like basis in November following last month’s sharp contraction (the worst October since 2008). While the annual sales event had resulted in the best week on record for online non-food sales, the BRC noted that this had come at the cost of sales from the traditional high street while also shifting spending away from other parts of the festive period (note that Black Friday is included in today’s releases but ‘Cyber Monday’ is not). The trend over much of 2017 has been one in which food sales have held up better whilst non-food sales have been relatively weak. Indeed, food sales rose 2.8% y/y (like-for-like) in the three months to November as consumers focused in on essential spending. Non-food sales decreased 1.2% y/y (like-for-like) over the same period.
The Reserve Bank of Australia kept its benchmark interest rate at a record low of 1.50% and the Aussie dollar rose to a three week high. The decision was expected by economists and the currency strengthening was caused by comments from the central bank indicating they expect inflation to quicken. New Zealand’s dollar also jumped as Acting Governor Grant Spencer said the “flexible inflation targeting approach is becoming more flexible” by putting more weight on growth and employment.
Sterling was volatile on this news in yesterday afternoon's trading session. It weakened after the news of the failure to reach an agreement. Against the USD, sterling is down at $1.3415, having reached a high of $1.3539 around 12.30pm yesterday.
The British Retail Consortium published figures showing that sales had risen 0.6% YoY on a like-for-like basis in November following last month’s sharp contraction (the worst October since 2008). While the annual sales event had resulted in the best week on record for online non-food sales, the BRC noted that this had come at the cost of sales from the traditional high street while also shifting spending away from other parts of the festive period (note that Black Friday is included in today’s releases but ‘Cyber Monday’ is not). The trend over much of 2017 has been one in which food sales have held up better whilst non-food sales have been relatively weak. Indeed, food sales rose 2.8% y/y (like-for-like) in the three months to November as consumers focused in on essential spending. Non-food sales decreased 1.2% y/y (like-for-like) over the same period.
The Reserve Bank of Australia kept its benchmark interest rate at a record low of 1.50% and the Aussie dollar rose to a three week high. The decision was expected by economists and the currency strengthening was caused by comments from the central bank indicating they expect inflation to quicken. New Zealand’s dollar also jumped as Acting Governor Grant Spencer said the “flexible inflation targeting approach is becoming more flexible” by putting more weight on growth and employment.