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Sterling soars on Brexit news but retreats as reports denied

Published: Thursday 17 May 2018

  • Italian government formation causes concerns for Euro
  • Employment boost fails to move Australian Dollar
​​By Michael Hart

Overnight, the Telegraph reported that the UK is preparing to stay in the customs union after Brexit, and beyond 2021. The news came after Prime Minister Theresa May said she’s aiming for a “future customs union” with the EU. Her top ministers also agreed this week on a last-resort plan to avoid a hard Irish border. Foreign Secretary, Boris Johnson, and Environment Secretary, Michael Gove, objected to the plan but were “outgunned” by others during the meeting. Sterling soared on the news, hitting 1.3580, however, the report has subsequently been denied and the Pound has fallen back into the recent ranges. There is still some work to do.

Italian government formation causes concerns for Euro
It would seem that Italy may well have a working government by the end of next week. The Far Right League and the Five Star Movement are very close to forming a coalition.  Apparently, the two parties considered asking the European Central Bank (ECB) for a €250bn write off of the country’s debts and an exit from the Euro. This has also been denied, however, the single currency will remain under pressure in the short term and this probably means that EU policymakers will harden their resolve in negotiations with the UK.
Employment boost fails to move Australian Dollar
The Australian employment market grew 22.6k in April (seasonally adjusted), slightly above expectations of 20.0k. Chief Economist, Bruce Hockman, said “the labour force participation rate was the highest it has been since the series began in 1978, indicating increasing attachment to the labour force.” The Australian Dollar was largely unmoved.
The data release calendar is rather light today. The focus will be on US Jobless Claims later this afternoon.
Short jokes
What do you call an unpredictable camera?
A loose Canon
How do you stop a bull from charging?
Cancel its credit card
When is a door a not a door?
When it’s ajar

Today's Major Economic Releases

Market BST Data/Event Previous Expected
CAD 13:30 Canada: Foreign Securities Purchases 3.96b 3.00b
CAD 13:30 US: ADP Non-Farm Employment Change 42.8k 42.8k
USD 13:30 US: Philly Federal Bank Manufacturing Index 23.2 21.1
USD 13:30 US: Unemployment Claims 211k 216k

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