Late yesterday afternoon we heard reports that EU and UK negotiators have agreed a Brexit withdrawal agreement text. We were actually in the process of producing a Brexit planning document for our audience, so our writers were particularly dismayed that they now have to add in a brand new section. Still, the news should certainly be viewed as a positive and investors certainly did, with sterling soaring against the euro and dollar.
There have been so many false starts over the past few months that it is worth considering exactly what still needs to happen before we can go so far as to say a Brexit deal has been agreed. The agreement needs to be passed by Theresa May’s Cabinet, then it will be passed to Europe ministers, then to EU27 leaders, then the UK Parliament and finally the EU Parliament. So, there is still quite a way to go and there is a very real possibility it could fall at the first hurdle (May’s own Cabinet). We’ll probably know more today.
Britain’s unemployment rose to 4.1% in the three months to September which is up from the 43-year-low of 4%. It was expected to hold steady and might well have been viewed as a bigger negative than it was, were it not for the fact that UK wage growth hit its highest growth rate for since December 2008. Excluding bonuses, average wages increased by 3.2% to £493 per week. This was better than analysts had expected and sterling made gains throughout the day, before taking off following the Brexit news.
The German ZEW economic sentiment index in November wasn’t quite as bad as the markets had expected, although the eurozone’s was much worse than expected. Consumer inflation expectations in the US held steady at 3% and the German inflation rate came in as expected at 2.5% from 2.3% in the previous month.
Today is another busy day, with Downing Street confirming there will be a Cabinet meeting at 2pm to consider the draft agreement. We will also see (deep breath) the GDP growth rate for the third quarter of 2018 from Germany and the eurozone, October’s inflation rates from the UK and US, industrial production figures from the eurozone, and mortgage applications up to 9 November 2018.
With so much volatility on the horizon, encourage your clients to speak to their Personal Trader about how a forward contract can lock in a single exchange rate on 020 7898 0541.