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Oh frabjous day

Two cheers for a Brexit deal

Two years and nearly five months after Britain voted to leave the EU the government has come up with the draft of a plan to execute the decision. The existence of the plan came as a relief to investors but they are under no illusions that what was agreed yesterday will easily become reality.

It was never going to be possible to reconcile the multiple demands of all the factions involved in the Brexit debate, even within the prime minister's own party. The agreement reached on Tuesday sees Britain remaining in the EU for a while but the exact details have not been disclosed. Conservative Chief Whip Julian Smith said he was "confident" it would pass when put to a crucial Commons vote: investors do not entirely share that confidence.

As could have been expected, they reacted positively to news of the agreement, sending the pound more than half a cent higher, but there was no follow-through. Sterling only narrowly beat the Swedish krona into top slot among the major currencies. It strengthened by an average of 0.7%, adding one US cent and half a euro cent.

Chinese trade

The other good news on Tuesday was that Washington and Beijing are involved in trade discussions "at all levels". Their aim is to prepare for a tête-à-tête between Trump and Chinese president Xi at the G20 summit which takes place at the end of the month.  

The joy at that development is not universal among the administration.  Economic advisor Larry Kudlow chastised trade advisor Peter Navarro for his comments at the end of last week when he said big business should not be encouraging the president to do a deal with China.

Investors were happy enough with the news though, if not with the US dollar. The Greenback spent the day on the slide, losing half a cent to the euro. The only statistic that might have helped it, the small-business NFIB optimism index, unexpectedly declined half a point to 107.4

Numerous numbers

Tuesday's UK employment figures did not do sterling a whole lot of good, mainly because unemployment ticked up to 4.1%. Basic earnings were up by 3.2%, beating forecast, while total earnings including bonuses rose by an on-target 3.0%. Today the focus will be on inflation.

The headline rate of CPI inflation is expected to come in at 2.5% this morning. In theory, the higher the number the better for sterling, in that it increases the upward pressure on interest rates. However, with a Brexit deal in the wind investors will probably be more concerned with the number of resignations from Theresa May's cabinet, and what that might mean for the eventual passage of the withdrawal bill through parliament.

There are inflation data also today from Spain, Sweden and the United States. Euroland reports on third quarter gross domestic product, industrial production and employment change. Tonight brings the often-surprising Australian employment data, which are forecast to show the addition of 20k jobs in October. 

GBP leads after draft Brexit deal agreed with EU

GBP leads after draft Brexit deal agreed with EU

USD uninspired by renewed Beijing trade talks

USD uninspired by renewed Beijing trade talks

AUD awaits jobs numbers tonight

AUD awaits jobs numbers tonight

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