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Sterling holding up as Brexit moves considered

Published: Monday 22 October 2018

  • Central bankers rule the week
  • US Gross Domestic Product likely to weaken the US Dollar
​​By David Johnson

According to UK Prime Minister, Theresa May, the Brexit deal is 95% complete. I guess the problem is that the remaining (perhaps the wrong word to use in this context) 5% relates to the irreconcilable problem of border controls between northern and southern Ireland. If Mrs May wasn’t reliant on the Democratic Unionist Party (DUP), she may have some leeway but… well, she is, and she hasn’t, and that’s the impasse. This is a big week for the Prime Minister and her Cabinet and the rest of the UK for that matter. Sterling will reflect the changing sentiment and is, therefore, likely to be pretty volatile.
The calm before the storm?
The EU still has the problem of the Italian budget to contend with… oh and Brexit, let’s not forget that, eh? However, these are the only matters to contend with today, because there is a distinct lack of hard data to consider. The apparent willingness by the EU to make some concessions to the UK in order to get a deal done is shoring the Pound up at the moment and the Euro is holding its own.
Central banks take the limelight later this week
With Monday likely to be quiet after a quiet overnight period – New Zealand has its ‘out of office’ message on for Labour Day. The rest of the week is dominated by central bankers. We will have more central banker speeches than anyone deserves and a decision from the Swedish and Canadian central banks. Amongst the speakers will be Bank of England members and those from the US Federal Reserve, the European Central Bank and others.
US Gross Domestic Product figures could be interesting…
The US Gross Domestic Product (GDP) data will be perhaps the most interesting non-central-bank entry in the diary. A slowdown is forecast and that would add weight to the US President’s concern over the pace of Federal Reserve rate hikes. If the data is worse than expected, a weaker US Dollar will ensue.
Bank of Canada ready to raise rates?
The Bank of Canada is widely tipped to be ready to raise their base rate from 1.5% to 1.75% when they meet on Wednesday. Inflation and retail sales data released last week was a tad weaker than expected, but inflation has been above the bank’s 2.0% target level for eight months in a row and many believe that will be the trigger for the rate hike this week. The Canadian Dollar, which has already benefited from the new trade agreement with the US and rising commodity prices, is likely to strengthen in the lead up to Wednesday and a little more after that, as long as the Bank of Canada sticks to the market-written script.
More to follow, but the calm of Monday is likely to be ripped apart as the week progresses. Have a good one.


A guy gets into the back of a cab at Heathrow Airport and gives the driver an address in Mayfair. As they set off, the passenger says, “This is going to sound like a weird request but, I think my wife is having an affair and I have flown back early because I think the scumbag she is sleeping with is at my house right now. It would be great to have a witness when I arrive. If I give you £50, would you come in with me to be my witness?”
The cabbie thinks about it for a while and then says, “I’ll do it for £100.” The passenger agrees and they travel the rest of the 30 minute journey in silence. When they arrive at the house, the passenger opens the front door quietly and he and the cabbie step very quietly upstairs to the bedroom. They can hear the couple in the room and the passenger bursts in to find his wife in bed with a grey haired man. The passenger grabs a stone ornament and rushes to the bedside with the object raised as if to batter the man, but his wife a calls out:
“Don’t do it John. This man has been very generous to us. This house, the Spanish villa, the cars, the business class flights, it has all come from him. I lied about the money I inherited. It has all been his money all along. If you kill him, it all stops!”
John stops in his tracks and looks across at the cabbie, “What would you do?”
“I think I would pull that blanket over his bottom if I were you. We don’t want him to catch a cold.”

Today's Major Economic Releases

Market BST Data/Event Previous Expected
CAD 13:30 Canada: Wholesale Sales 1.5% 0.1%
AUD 15:00 Australia: Conference Board Leading Index 0.1% 0.1%

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