Brexit and China Trade War in Focus This Week

7th May 2019 Market Update

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🇬🇧 GBP –  On Friday afternoon, the pound rallied higher to new 5 week highs against the euro and month highs against the dollar, as speculation grew that following the devastating defeat in the local elections, the government is ready to offer further compromises to Labour, which would mean a potential Brexit agreement this week. In addition, the pound found support from comments made by Labour Leader, Jeremy Corbyn, stating that the lawmakers need to “get a deal done” as the electorate was losing patience, which showed some further willingness for compromise from the Labour party. Over the weekend, reports suggest that PM Theresa May is prepared to offer Labour fresh concessions to allow for a more customs union style arrangement with no checks on goods crossing the UK-EU borders. The “big, bold” new agreement is said to be offered today, however, there are fears the PM’s offer “could split the Conservative Party down the middle,” and as such the pound has fallen back from the highs of Friday.

With a lack of data releases this week, focus will remain on the Brexit negotiations.

🇪🇺 EUR – The Eurozone saw inflation levels pick up on Friday as April readings showed an improvement towards the 2% target, though this had little impact on the single currency. Services data and retail sales yesterday also showed an improvement which gave some support to the Euro.

Today, German factory orders have been a bit of a mixed bag with the monthly figure missing expectations and the yearly has showing an improvement, however both are better than previous and this is likely seen as an overall positive.

🇺🇸 USD –  On Friday, unemployment fell to the lowest in nearly half a century in the US, pointing to sustained strength in economic activity. In addition, job growth surged as the non-farm figures beat expectations however, this did little to support the dollar as modest wage growth and a poor non-manufacturing ISM result capped any potential USD gains.

Over the weekend, US President Trump used his favourite social media outlet to threaten to impose new tariffs on all US imports from China, ahead of the Chinese visit to Washington this week, which has now also been put in question. Although, US Trade Representative told reporters that China’s top negotiator Liu He was still coming to Washington for trade talks starting Thursday (instead of Wednesday) and confirmed that tariffs would go rise on Friday. As a result, markets will be focussed on the trade negotiations this week.

 

Summary:
GBP: Government to offer new Brexit deal to appease Labour

EUR: German Factory orders pickup today

USD: China Trade talks in question following Trump Tweets

 

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Darren Kilner

Darren Kilner

Darren is Head of Dealing at FairFX. Darren lives and breaths FX, his Mastermind topics are G8 currencies and economic forecasts.

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