- Japanese Yen is trading slightly higher, but strength is limited
- Currency markets to trade to tight levels today with no Tier One data releases
By Killian Greenwood
The US and South Korea have kicked off the joint annual military exercise today. North Korea warned that the drills would worsen the tensions by "throwing fuel on fire". But markets have had little reaction to the news so far. The Japanese Yen is trading slightly higher, but strength is limited. Markets will be focused on developments in the White House and the Federal Reserve Annual Policy Symposium conference in Jackson Hole later in the week, where the Federal Reserve Chair, Janet Yellen, will meet the president of the European Central Bank (ECB), Mario Draghi.
In the UK, Prime Minister Theresa May's government declared that it's stepping up pressure on the European Union (EU) to move the Brexit negotiation into trade agreements as soon as October. Brexit Secretary, David Davis, warned in an article in the Sunday Times that "with the clock ticking, it wouldn't be in either of our interests to run aspects of the negotiations twice." And, he argued that "it is simply not possible to reach a near-final agreement on the border issue until we've begun to talk about how our broader future customs arrangements will work."
He went on to say, "furthermore, if we get the comprehensive free trade agreement we're seeking as part of our future partnership, solutions in Northern Ireland are easier to deliver." The EU's chief Brexit negotiator, Michel Barnier, responded by tweeting that the quicker an agreement was found on the breakup topics "the quicker we can discuss customs and future relationship."
The UK government has started releasing a series of policy documents, covering topics such as Northern Ireland and the customs union, for Brexit negotiations, since last week. A paper titled "Future Customs Arrangements" released last week triggered demand from businesses for a plan to replace customs union, an arrangement that allows movements of goods across the borders of EU Member States without tariffs. Without proposing a concrete and feasible alternative, the paper indicated that leaving the EU represents leaving the EU Customs Union, and the government seeks a new arrangement that "facilitates the freest and most frictionless trade possible in goods between the UK and the EU".
The next round of Brexit talks start on 29th August.
With a lack of important data due to be released today, currency markets will remain within tight trading ranges, so we are unlikely to see much volatility from economic events today.