There were no major economic data releases from the UK, eurozone or US yesterday, but that didn’t stop the pound from having an extremely volatile day. Against the dollar, there was more than a 2.5-cent difference between the highs and lows at which it traded throughout the day. At one point it approached the $1.28 mark, while earlier in the day it had been nearer $1.31.
The moves were driven by Brexit headlines from over the weekend, which took a variety of forms, none of them good. Theresa May is under new pressure, as leading Brexiters and Tory remainers are against her proposals; Tony Blair, Gordon Brown and John Major are all in agreement that there should be a new referendum (David Cameron is yet to comment); Keir Starmer says Brexit can be stopped (while Jeremy Corbyn insists it can’t); and the UK has all but given up on a November Brexit summit.
One wonders what Brexit secretary Dominic Raab meant when he said ‘thumbs up’ after leaving Downing Street last week. He has since admitted he hadn’t quite understood just how reliant the UK’s trade in goods is on the Dover-Calais crossing. If the last couple of weeks have been one step forward, then the last couple of days have been two steps back. The situation is rather remarkable when you think about it: there are now 136 days until Brexit and nobody appears to know what is happening.
Other headlines from yesterday included oil prices rallying after Saudi Arabia announced that it will be cutting oil production by half a million barrels per day next month. The knock-on effect will be that global consumers will pay more to fill their tanks and transport costs around the world will increase.
Today we have September’s average earnings and unemployment rate figures in the UK, with the ZEW economic sentiment indices from Germany and the eurozone also on the schedule. We will also see the German inflation rate for October; it will be a big week for Germany, as Wednesday sees the GDP growth rate for the third quarter of 2018. There is a general expectation that the figures will show growth has plummeted in the last quarter.
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