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Sterling slips on Trump’s misconstruing of Brexit deal

Published: Tuesday 27 November 2018

  • US Dollar strong in spite of Fed’s inflation worry
  • New Zealand trade deficit contracts less than expected
​​​​By David Johnson

So, the US President (who has now, quite alarmingly, started referring to himself in the third person) misinterpreted part of the UK Prime Minister’s Brexit agreement and that is headline news. Surely, those who are reporting on the plan know the contents now? Why would they trust Trump to understand it better than them? Most odd. Nonetheless, Sterling slipped against all but the Euro on a day that lacked any other meaningful data. 
Pound pummelled by parliamentary protests
The Pound’s slide would have been assisted by the unrelenting hammering the Prime Minister received in the House of Commons.  Whether you like her, or have any confidence in her plans, you have to admire Theresa May’s resilience in the face of such a barrage of abuse. I am not sure I could stand that with anything like the same stoicism. We will find out if her resilience has worked out on the 11th December, when she seeks UK parliamentary approval for the plan.
US Dollar still strongest currency
The lack of hard data on Monday left the central bankers and politicians in the spotlights. The Federal Reserve suggested they believe US inflation will fall below 2.0%; their central target rate. That would suggest the pace of interest rate hikes could slow and may even pause. That would normally weaken the US Dollar, as it diminishes the demand for USD by investors, but there are so many external factors working in the US Dollar’s favour, it continues to outperform other currencies. We have a couple of Federal Reserve speakers today and a consumer confidence survey, which is expected to be down on last month. So maybe there is a little bit of light at the end of the tunnel for USD buyers.
Eurozone and Euro enjoy calm before the storm
We lack Eurozone data today. Other than a speech by Yves Mersch of the European Central Bank, it’ll be a quiet one for the Euro. I suspect we may see little volatility, but that will pick up as we approach the UK Brexit vote on 11th December, because Brexit does impact the EU, although they have cleverly downplayed that during the negotiations.
New Zealand awaits financial stability report
Overnight, we found out that New Zealand’s trade deficit did contract a little, but was much greater than the markets had expected. The New Zealand Dollar remained quite weak, but traders will probably await the Reserve Bank of New Zealand’s (RBNZ) financial stability report before any major reaction. That is released at 20:00 GMT. 
Lean on me…
And, if you are desperate to stand in front of it with your arms out, pretending you are holding it up, then you need to get flights to Pisa immediately, because the famous leaning tower appears to be righting itself. Mind you, back in the Nineties, the famous leaning tower was increasing its lean so much that it was closed to visitors for 11 years. So, maybe it will correct itself once again… or un-correct itself, depending on your point of view.
Quotes from Lee Mack
We’ve had to get a live-in nanny, ‘cos that dead one wasn’t working out.
My Wife. She’s carrying our first child. He’s eight, the lazy little  b…..
We had a bite to eat around the corner; Horse and Hounds. I won’t be ordering that again.
I’m going to donate my body to science, and keep my dad happy – he always wanted me to go to medical school.
I’ve wanted to have a baby for about five years but she wants one forever.

Today's Major Economic Releases

Market BST Data/Event Previous Expected
GBP 11:00 UK: Confederation of British Industry Realized Sales 5 10
USD 15:00 US: Conference Board Consumer Confidence  137.9 136.2
NZD 20:00 Reserve Bank of New Zealand Financial Stability Report    
NZD 20:00 Reserve Bank of New Zealand Governor Orr Speaks    

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