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December 2017

Brexit Secretary David Davis’ comments pressures Sterling

Published: Tuesday 12 December 2017

  • Brexit Secretary David Davis’ comments pressures Sterling
  • The National Australia Bank’s (NAB) business conditions drops
By Mike Mistretta

There was little data out yesterday although Sterling continued to drift lower due to comments by Brexit Secretary David Davis that Prime Minister May’s Brexit agreement last week was much more a statement of intent than it was actually legally enforceable. Mr Davis told the BBC that UK won't be paying the divorce bill if there was no trade deal. He said "if it is conditional on an outcome. It is conditional on getting an implementation period, it is conditional on a trade outcome." This is the exact opposite of what Chancellor Philip Hammond told parliamentary committee last week. However, Hammond did say that "nothing is agreed until everything is agreed in this negotiation." But he also said "I find it inconceivable that we as a nation would be walking away from an obligation that we recognized as an obligation.

The National Australia Bank’s (NAB) business conditions dropped sharply by -9 to 12 in November, down from 21. Business confidence dropped -2 to 6 which helped the Australian Dollar weaken overnight. The Kiwi Dollar has continued to be boosted by the appointment of Adrian Orr as the next Reserve Bank of New Zealand (RBNZ) Governor as it has been interpreted as guaranteeing a practical approach in RBNZ reform.

This morning we have some key UK inflation data. If this misses the 3% mark, we may see Sterling suffer a bit more, consequently any number higher than this could be positive for the Pound. Dollar traders are cautiously adjusting their positions ahead of the Federal Open Market Committee (FOMC) rate hike and new forecasts on Wednesday. Later this morning, we have German ZEW economic sentiment. In the afternoon, we also have US Producer Price Index (PPI) and European Central Bank (ECB) President Mario Draghi speaking this evening. 
Doing nothing

Wife: Whatcha doing? 
Husband: Nothing. 
Wife: You did that yesterday. 
Husband: I wasn't finished.

Today's Major Economic Releases

Market BST Data/Event Previous Expected
GBP 09:30 UK: Consumer Price Index 3.0% 3.0%
GBP 09:30 UK: Core Consumer Price Index 2.7% 2.7%
GBP 09:30 UK: Producer Price Index Input 1.0% 1.6%
GBP 09:30 UK: Retail Price Index 4.0% 4.1%
EUR 10:00 EU: German ZEW Economic Sentiment 18.7 17.9
USD 13:30 US: Producer Price Index 0.4% 0.4%
USD 13:30 US: Core Producer Price Index 0.4% 0.2%
EUR 19:00 European Central Bank President Draghi Speaks    
AUD 22:15 Reserve Bank of Australia Governor Lowe Speaks    

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