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Endgame

I got some big enemies

In her speech at the lord mayor's banquet yesterday evening the prime minister said Brexit negotiations are "extremely difficult" but are "now in the endgame". As she spoke, critics of her plan were repeating their warnings that her plan will not get through Parliament. 

A report in the Financial Times yesterday suggested that a deal could be close. It was dismissed by Downing Street, where a spokesperson said it should be taken "with a bucket of salt". Sterling spiked higher in response to the story before falling back just as swiftly after its rebuttal. Nevertheless, rejected or not, the story went some way towards countering the bleak litany of doom that had accompanied the pound through the weekend.

On average sterling strengthened incrementally against the other ten most actively-traded currencies. It added half a euro cent and a quarter of a Swiss cent, though it lost a quarter of a US cent and a proportionally-similar third of a yen.

The truth is it's easier to ignore it

In fact there was precious little to ignore when it came to the economic data on Monday. Italian industrial production fell by less than forecast in September. 

It was not helpful that the only ecostat related to a suboptimal performance by Italy. The EU has set a deadline of today for the government in Rome to revise its 2019 budget so as to run a smaller deficit than the planned 2.4%.  Rome is almost certain to refuse, leading to a procedural process and a possible fine. The Italian coalition seems unworried by that prospect, but it would sit up and take notice if investors were to demand an even higher premium for lending to the country.

Back in September, prior to the announcement of the deficit budget, Italy had to pay 2.36 percentage points more than Germany to borrow 10-year money. Today that premium is 3.06 percentage points. The gap could widen further on a downgrade of Italy's credit rating, weighing on the euro.

I've passed days without fun

After a thoroughly unentertaining Monday, investors will find rather more to interest them on today's agenda. The main event for sterling will be the UK jobs and earnings numbers this morning.

Analysts expect unemployment to come in unchanged at 4.0% for September, with average earnings with and without bonuses rising by 3.1% and 3.0% in the year. In the context of tomorrow's inflation data, which are reckoned to show consumer prices rising by an annual 2.0%, the wages numbers ought to be positive for sterling if they are in line with forecast.  

That said, the capacity of investors to get excited about UK data is as nothing to their ability to become agitated about Brexit developments. A decent set of employment and earnings data would be worth less to the pound than a believable story about an imminent deal with the EU. 

GBP steadies after weekend sell-off

GBP steadies after weekend sell-off

EUR softer as Italian budget deadline looms

EUR softer as Italian budget deadline looms

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