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Brexit text excites GBP traders and Sterling rises

Published: Wednesday 14 November 2018

  • German data drags Euro down
  • UK and EU agreement – or not – will drive GBP and Euro today
​​By David Johnson
Well, that was exciting wasn’t it?! We heard that a form of words had been agreed for the UK’s exit from the EU and Sterling zipped higher. However, no one in the Cabinet has agreed it, Parliament hasn’t agreed it and the 27 remaining EU States haven’t agreed it yet. So, it is just another step in the negotiations at this point. There is a chance Sterling will slip back and that uncertainty has caused some GBP selling overnight as a risk and profit taking measure. It is interesting though that the uncertainty over the Brexit process appears to be the only thing holding the Pound back. Any hint of a step closer to certainty boosts the Pound across the board. So, rather than Mark Carney’s threat to hike interest rates in a post-Brexit period, the Bank of England may need to cut rates to halt an overheating Pound. I love a good dilemma, don’t you?  Today’s Cabinet meeting in the UK and EU meeting in Brussels will be a focus and, dependent on your chosen news source, this will either be a disaster, or a very tightly contested success for the deal. I refer you to the lyrics from C&C Music Factory; ‘Things that make you go Hmmmmm’.

This morning brings UK inflation data as well as all the Brexit stuff and we are expecting a pick-up in the annual rate to 2.5%. That’s behind wage growth; a factor that could embolden the Bank of England (BoE) to seek earlier interest rate hikes. 

Brexit deal news also strengthens Euro
The news of a possible deal was obviously seen as a monkey off the Euro’s back as well, because the shared currency also strengthened, but not as much as the Pound. The Euro is unlikely to make gains on this morning’s German Gross Domestic Product (GDP) data, which showed growth of just 1.1% between Q2 and Q3. That was below expectations and less than half the pace of the Q1 to Q2 growth, which was 2.3%. That follows yesterday’s very poor economic and business sentiment indices from Germany’s ZEW institute. However, Eurozone GDP growth is expected to be largely in line with last quarter’s 1.7%. Any deviation to the downside, will weaken the Euro. 

Oil fears worrying markets
In other news – and yes, there is some – oil is down a little over fears of oversupply. 12 days of consistent losses in the price of crude oil are worrying the markets because it has knock on effects on the USD and other commodity markets. Speaking of the USD, this afternoon brings US inflation data. That is expected to be a little higher than the previous month-on-month inflation rate, but not enough to boost the annualised figure of 2.2%. The US Dollar remains strong for now and has pegged the Pound to below $1.30 and the Euro to $1.1250 or thereabouts. 

Reelin’ in the years
And a 69 year old in Holland asked the local authorities to change his date of birth on his documents and knock 20 years off his age. When they refused because it makes no sense whatsoever, he launched a legal challenge. Emile Ratelband, who is described as a self-help guru, was told by his doctor that he had the body of a 45 year old and he has apparently taken that to heart. His body may be healthy but you would have to question his sanity if he thinks time can be erased in this way. 

French for beginners
A boy was really struggling in French class at school.  
To encourage him, his teacher said, "What I have found is that you'll know you're really beginning to get it when you start dreaming in French." 
Weeks later, the boy ran into class all excited. "Miss Dupree, Miss Dupree! I had a dream last night and everyone was talking in French!" 
"Great!" said the teacher; "what were they saying?" 
"Haven’t a clue," said the boy.