Market Brief: UK Government limping along

11 Sep 2018

Lewis Thorn

Dealing team

A session in Parliament yesterday followed by PMQs did very little to calm nerves that the prospect of making progress on Brexit at next week’s EU Summit looks to be diminishing.

Today's data release
  Key levels
08:30 Halifax house price   Support Resistance
10:00 EU GDP GBP/USD 1.3220 1.3550
13:15 US initial jobless claims
GBP/EUR 1.1065
1.1420
16:00 ECB's Mario Draghi speaks      

Market overview

 A session in Parliament yesterday followed by Prime Ministers questions did very little to calm nerves that the prospect of making progress on Brexit at next week’s EU Summit looks to be diminishing. An article in today’s Telegraph today states that EU Commission president Jean-Claude Junker believes Theresa May’s government could collapse within weeks if Brexit talks remain deadlocked. However he will extend the deadline for Mrs May to settle a dispute over the Irish border to the eve of the EU leaders summit next Thursday.
On matters Brexit, it is also very concerning to learn that the UK Brexit Secretary David Davis looks to have misled Parliament. Mr Davis admitted that that the government had not carried out a sector-by-sector analysis of the impact of Brexit on different UK sectors, following months of claiming that the work was ongoing. His admission, to a House of Commons committee yesterday was the culmination of a long parliamentary battle. This really raises questions about the government’s preparedness for Brexit and the whether a Hard Brexit strategy was well thought out. 

The day ahead

This morning Eurozone GDP will take most of the focus with the second estimate for the third quarter is expected at 10am. No change is expected and growth is expected at 0.6% with the annual number coming in at 2.5%. Beyond that the markets will almost certainly start focussing on tomorrows non farm payroll release. However it would seemingly take a catastrophic number to derail the Feds plan to raise interest rates next week it’s still a key release. Yesterday’s ADP employment report came in at 190k, although often criticised for its accuracy at giving an indication of what the main show might bring, it’s still considered one of the best indicators.

Thought of the day

Our thought today comes direct from our trading desk: the biggest non personal cheque ever written was for $9,000,000,000 and was used to keep Morgan Stanley from collapsing in 2008. The investment was made by Mitsubishi UFJ to keep the firm afloat but due to the Columbus Day holiday when banks in the US and Japan were closed, a physical cheque was hand delivered by Mitsubishi’s CEO who had to jump on a plane in Tokyo and fly the cheque over to New York! This is a huge amount of money but is dwarfed by the daily turnover of the global FX market which turns over approximately 5 trillion dollars a day! Even if your business is not likely to be writing a $9 billion cheque in the near future, the uncertainty of the Brexit situation means there is plenty to keep your eye on. If you would like some guidance on what to watch out for in the FX market and what could influence the rates in 2018, give the Investec dealing desk a call on 0800 055 6339.

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