11 Dec 2017

Market Brief: May gets a breakthrough

Lewis Thorn

Dealing team

News this morning has shown that an agreement between the UK and the European Union has been struck ahead of next week’s EU leaders’ Summit.  

Today's data release
  Key levels
09:30 UK industrial production   Support Resistance
09:30 UK manufacturing production GBP/USD 1.3320 1.3550
13:15 US non-farm payrolls
GBP/EUR 1.1065
Market overview

News this morning has shown that an agreement between the UK and the European Union has been struck ahead of next week’s EU leaders’ Summit. In a statement released early this morning the European Commission announced that there had been sufficient progress on the first phase of Article 50 negotiations and that it would be recommending this assessment to the European Council which meets next week (14/15 December). The European Commission has stated that they are now ready to begin discussions on the second phase (future arrangements) immediately pending approval at the summit next week. Effectively agreement has been reached over the key principles, that being the Brexit bill, EU citizens’ rights and Northern Ireland. The last point had been the final significant hurdle following a breakdown of talks earlier this week. It is not exactly clear how the border issue between Northern Ireland and the Republic of Ireland has been resolved. What we know so far is that the UK has made significant commitments to avoiding a hard border, whilst also stating that unless otherwise agreed the UK will maintain full alignment of Northern Ireland rules with the EU internal market and customs rules, whilst at the same time ensuring that no internal regulatory barriers develop between Northern Ireland and the rest of the UK. Comments from the DUP have suggested that further details still need to be worked out. 

The day ahead

Today will cap off what has been a hectic week with the Non-Farm payroll number due for release at 13.30 this afternoon. However this morning we have two key UK releases in the form of Industrial and Manufacturing production which are due at 9.30, although activity is expected to have remained flat on the month. Beyond today, next week looks like it has the potential to be a real Christmas cracker. With interest rate announcements from the Bank of England, ECB and the Federal Reserve which is expected to hike rates. On the data front, UK CPI on Tuesday is expected to support our earlier prediction that inflation has peaked, though labour market stats out Wednesday are expected to show that wage growth remains subdued despite the unemployment rate remaining historically low. Bank of England is all-but-certain to hold fire at its policy meeting on Thursday; we will be looking for any clues over the timing of any future policy tightening in the minutes. Retail sales are similarly out on Thursday, but the already volatile measure is likely to be distorted further by Black Friday. 

Thought of the day

With Christmas fast approaching we have only 3 weekends left to dash to the shops to get your turkey and trimmings or if like me, any last minute presents at hopefully good prices! Headlines from Europe overnight have certainly strengthen the Pound and now both the Euro and the dollar look at favourable prices for UK importers! Over the next 7 days we will see a key US jobs release, three major central bank decisions and then the finale of the EU summit next Thursday. Before you rush to the shops this weekend, be sure to call your Investec dealer today to see what bargains you can secure on your currency purchases

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