Daily & Weekly Market News

Get access to our expert daily market analyses and discover how your currency has been tracking with our exchange rate tools.

May shows her flexibility.

By Hamish Muress

So it is finally beginning to happen, Theresa May is beginning to crack or show that she is willing to take radical steps, it really depends on your Brexit point of view. The Prime Minister reportedly floated the idea of extending the transition period by another year, extending the effective date by a further 12 months to the end of 2021. Sensible to many, yes. However, to many Tory Brexit MPs this may not suffice and could mean that any vote of a ‘meaningful deal’ will be harder for her to pass.

This morning the pound has suffered the effects of this uncertainty, not helped by any means by the fact that the EU 27 emergency summit in November is off as it currently stands although members have agreed that negotiations can continue until then.

Taking a step back from Brexit finally UK inflation came out yesterday lower than expected falling back to 2.4% in September, welcome news for many as the cost of living squeeze eases and may make the Bank of England stop and think before another interest rate hike.

If there is one person who is completely unflappable and immune to the tweets of Donald Trump it may be Federal Reserve Chairman Jerome Powell. Last night's Fed minutes showed (largely as expected) that the central bank is on track to hike rates continuously until the ‘neutral rate’ of 3% is reached. This in a likelihood means hikes in December 2018, March 2019 and then June 2019. Powell, who has Trump’s pick for the top job at the Fed has clearly showed that he feels no pressure from the President who has often moaned about the Fed hiking rates and recently claimed that he knew more about monetary policy than the central bank.

The Euro has managed to plug some of the losses against the USD dollar seen from the Fed minutes thanks to none other than Italy. The spread between 10 year German and Italian yields peaked yesterday before retracing suggesting some confidence in the country whilst local bank shares also recovered somewhat. The key date for Italy still remains the end of the month when S&P and Moody’s are likely to revise down the country’s sovereign credit rating further towards junk status.

The Aussie dollar rallied overnight off the back of the myriad that is the Australian jobs report. Looking at the headline figures, unemployment fell in September to 5% beating expectations whilst the more granular trend participation numbers remained steady.

Manufacturing sales in Canada fell almost as expected to -0.4% thanks to car assembly plant shut downs. The main force behind the Loonie yesterday was the Fed minutes as well as the sharp drop in Crude Oil prices. USD/CAD went through the key psychological level of 1.30 and remains there this morning.

It will be a quiet end to the week for the New Zealand economic calendar with no releases of note. As a result the Kiwi will be at the mercy of events elsewhere (not much change there). Whilst the US Treasury declined to label China as a currency manipulator there are also reports that President Trump is planning to up the rhetoric and tensions with China regarding trade.