There is very little to report on from yesterday. ECB President Draghi spoke at the European Parliament, where he avoided giving any new steer on monetary policy ahead of the 26th October ECB meeting. Draghi repeated earlier warnings that the economic recovery still needs to translate more convincingly into stronger inflation dynamics, whilst also repeating the view that the ECB is becoming more confident that inflation will eventually head to levels in line with the inflation aim. On the exchange rate, Draghi warned that the volatility represents a source of uncertainty but he avoided commenting on the specific level, unsurprisingly. Draghi’s comments did little to help the Euro, which had been losing ground against the USD through the course of yesterday morning, reflecting the uncertainty around the Merkel’s new coalition mandate.

It looks like politics will be dominating market sentiment in the days ahead given the recent German Election, a scheduled Macron speech today and the ongoing UK/EU Brexit negotiations. According to several newspaper articles, French President Macron will give a speech today (two days after the German elections), laying out his key proposals for Europe. The press have suggested that the speech will include: plans for a permanent finance minister for the euro area, a budget worth several percentage points of aggregate GDP and a “European Monetary Fund”. We will have to see if Merkel can continue to support Macron’s integration initiative given the outcome of the German Election? And if so how quickly can the integration progress?

On Brexit news, the EU’s Chief Brexit negotiator Barnier has signalled he is unwilling to discuss a trade deal until the UK provides more clarity. He said, “what is important now is for the UK government to translate the (PM May’s) speech into a clear negotiating position”. His counterpart David Davis has reiterated that the UK will honour its financial commitments, but has avoided specifics. We wait and see how the Brexit talks evolve. Looking at politics outside of Europe, geopolitical tensions between the US and North Korea continue to rise. North Korea’s Foreign minister threatened to shoot down US warplanes in any airspace given that “the US has declared a war”. 

The day ahead

Looking at today’s calendar, we have the UK Finance Loans for Housing data. Over in the US, we have fed speeches from Brainard and Bostic followed by a Yellen speech entitled "inflation, uncertainty and monetary policy". 

Thought of the day

Serena Williams, arguably the best female tennis player of all time, celebrates her 35th birthday today. For the first time, she will be celebrating with her newly born daughter Alexis Olympia. With 23 Grand Slam titles to her name, she has been unstoppable since her first one in 1999 in New York City. Ranked world number 1 on 8 different occasions she will soon be back on a comeback trail following pregnancy as her ranking now sits at 23.73 WTA titles alongside the Grand Slams means a prize money purse of over $90,000,000. Investec Bank has looked after some British players’ FX transactions over the years and is ready to help if it’s not just Corporate FX exposure that you need to cover! Please contact your Investec Dealing team on 0800 055 6339 if you want to discuss this further.