Today's data release
 Key levels
09:00UK services PMI SupportResistance
09:30EU composite PMOGBP/USD1.32201.3550
13:30US trade balanceGBP/EUR1.1070
14:45US 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. 

The day ahead

This morning sees the release of the UK Services PMI at 9.30am. Last month’s figure was a six month high at 55.6, predominantly on the back of a rebound in new orders growth. Our forecast is for a retracement in the PMI to 54.6. The Eurozone also publishes their final Services PMI alongside the composite figure at 9am. Over in the US we have the Trade Balance for October and final PMIs as well later this afternoon.

Thought of the day

On this day in 1901, the animator, voice actor, producer, and entertainer who founded The Walt Disney Company, was born. He produced classic films as Snow White and the Seven Dwarfs, Pinocchio and Cinderella. Over the course of his storied career, he set a record of winning 22 Oscars as well as receiving 59 nominations; on top of that he received 4 honorary Oscars. If Walt Disney was alive today, you would assume he would be tremendously proud of what his company has achieved. Walt Disney are also currently in talks to buy Fox International. A Disney takeover of Fox’s entertainment assets would create a Hollywood powerhouse. Fox’s recent hits have included the Planet of the Apes and X-Men film franchises, while Disney controls Pixar and the Star Wars series. It is yet to be seen whether this deal will go through as it could be blocked by the regulators. The UK’s Competition and Markets Authority (CMA) is reported to be scrutinising the deal. Speaking of deals, will PM May get the Brexit deal that she is hoping prior to the EU summit next week? What will the outcome mean for the UK in 2018? If you'd like to hear the Economist view, join our Economist Conference Call tomorrow by registering here.

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