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Pound rises as EU approves Brexit withdrawal agreement.

By Jake Trask

The pound has risen modestly this morning as traders digest the news of the EU signing off UK Prime Minister, Theresa Mays Brexit withdrawal agreement in Brussels yesterday. The plan was unanimously given the green light by EU heads of state and signals the beginning of a campaign by the PM to get the plan approved in a vote in the House of Commons next month. Mays proposal looks likely to be voted down by dozens of members of her own Conservative party however it will be interesting to see how many fall in line given the potential economic damage voting against it could cause the UK economy. Warnings have been issued by several members of the EU team already that the deal on the table is the only one that will be offered to the UK. EU Commission President, Jean-Claude Juncker stated in a press conference after the announcement that this was “the only deal possible.” Dutch PM, Mark Rutte, praised May stating, “She has fought very hard, she was very stubborn, and she always is, in a positive sense, very tenacious." GBP/USD has risen to around 1.2835 this morning however the moves will likely be capped before the crucial parliamentary vote where it will likely either soar or collapse on the outcome of the MPs poll. The vote is penciled in for the 12th December.

Global equities are higher this morning as the Brexit agreement and positive news re: Italys budget encourage risk on trade. As a result USD/JPY is pushing higher reclaiming the 113 handle however the greenback has lost ground against the euro. This week’s highlights from the States are the second reading of Q3 GDP with a revision from 3.5% to 3.6% expected; we also have the release if the minutes from the last FOMC meeting with policy members thoughts on the appropriate pace of hiking in 2019 likely to be key area of interest. EUR/USD trades at 1.1375.

The euro is higher this morning as the shared currency rallies on positive news re: Italy’s budget. Reports emanating from Italy have stated that the coalition government could publicly state a lower target deficit rate in an effort to get the controversial spending plans approved by the EU. The current deficit target is 2.4%, under the 3% threshold that EU law limits it to however higher than the c1% the EU was hoping for given Italy’s huge 131% of GDP debt load. This week’s notable events are this afternoon’s discussion from European Central Bank President, Mario Draghi in Brussels re: monetary policy and the health of the EZ economy. Friday’s big data is inflation figures from the bloc with headline CPI predicted to fall back to 2.1% from 2.2% with the core reading remaining depressed at 1.1%. GBP/EUR is at 1.1285.

The Aussie is benefitting from risk-on trade this morning with AUD/USD rising around 40 pips this morning to .7260. This week’s big release is the quarterly Private Capital Expenditure number due Wednesday night with 1.1% growth expected for the July-September period. Other than that it’s pretty quiet from Oz so news re: Italy’s budget will likely be the main driver for the local dollar. GBP/AUD is at 1.7675.

Brent Crude oil has regained the $60 a barrel handle this morning as risk on trade lifts the global benchmark. The move higher and rally in equities has helped the loonie and pushed USD/CAD back below 1.32 during the Asian session. Friday sees the monthly GDP print from Canada as well as Octobers Raw Materials Price Index number. GBP/CAD sits at 1.6935.

This week’s first top tier data has come from New Zealand where Retail Sales numbers missed target by some distance. An expected rise in the overall reading of 1% and core reading of 1.5% instead saw the overall reading coming in flat with the core figure showing a mere 0.4% growth. The miss saw NZD/USD gap lower by 30 pips to around .6755 however the global risk on environment has helped pare these losses with NZD/USD now at the .68 level. Tuesday night sees the latest Reserve Bank of New Zealand Financial Stability Report published with bank chief, Adrin Orr due to give his thoughts on it at a press conference shortly after. GBP/NZD is at 1.8855.