All the action overnight was in the US after Republicans were left scrambling to salvage the Senate tax overhaul bill. The vote of three key senators hinged on an increase in taxes down the line if revenue targets are not met. Markets have become sensitive to any progress on US tax reform that would give yet another boost to equity markets as we enter the final weeks of the year, which are already fuelled by optimism on earnings and economic growth throughout 2017. Senate Majority Leader Mitch McConnell said votes on the tax bill will resume at 11 am US time which could fuel some late afternoon activity in the London session. With talk yesterday of a spat between the President and his Secretary of State, Rex Tillerson - Trump will be desperate for some good news to distract from his political woes.

This morning Sterling continues to ride the crest of the Brexit wave as confidence continues to grow that the UK and EU will soon progress to trade talks. Sterling remains close to 1.35 and 1.13 against the dollar and euro respectively. As mentioned earlier this week, an agreement on the Irish border remains crucial and headlines overnight suggest that parties on both sides are still a little way off agreement on the issue. The Prime Minister is set to meet with EC President Juncker on 4th December to discuss the next steps.

The day ahead

Looking ahead today we start with UK manufacturing data due at 9.30am with market expectations of a reading of 56.5. It’s worth noting that October’s PMI edged up to 56.3 from 56.0 in September, with both output and new orders maintaining buoyant rates of growth. Moving over to the afternoon we have US Manufacturing PMIs at 2.45pm before votes on the key senate tax bill resume.

Thought of the day

A Lobster had been found with a Pepsi logo tattooed on its claw. The crustacean was discovered off New Brunswick in Canada earlier this month, prompting concerns about the extent of plastic pollution in the world’s oceans. Ms Lindstrand who discovered the lobster said she immediately recognised the familiar logo as she drinks around 12 cans of Pepsi every day. A Lobster with a tattoo isn’t the only thing that surprised this week, as sterling was clearly surprised by the progress of Brexit negotiations. Although the divorce bill needs to be voted on at next month’s Brexit summit GBPEUR is very close to one year highs. If you would like to discuss hedging at these levels please call the Investec Dealing Desk on 0800 055 6339.