Difficult but possible
The late-night negotiations in Brussels were secret. Recent optimism on all sides cannot therefore be justified by any hard facts. Nevertheless, financial markets love a good story to punt, and this is one of the biggest and best. Sterling led the field yesterday for a fifth successive day, adding an average of 1.3%.
The BBC's Laura Kuenssberg focuses on the view of those on the periphery of negotiations that reaching agreement is "difficult but possible". The Guardian suggests that Northern Ireland could remain de jure in the UK customs area while de facto remaining in the EU customs area. Think Schrödinger's cat. NI would be both inside and outside the EU customs union at the same time until a transaction took place, whereupon it would have to be in one or the other.
But never mind the casuistry: If all sides can sign up for this cunning trick the agreement might have legs. And that is where investors are pinning their hopes.
Mostly helpful data
No obvious horror stories were to be found among Tuesday's economic statistics. There were elements of disappointment among the UK employment and German confidence numbers but nothing really to move the dial. Despite sterling’s 4.6% gain over the last week, this morning a Bloomberg report caused a sharp fall in the pound after stating the EU sees a Brexit deal as impossible unless the UK changes its position. Dampening the rhetoric of a deal very much on the cusp of being announced, sterling weakened as this scepticism in a crucial week of negotiations caught wind.
The UK unemployment rate edged up from 3.8% to 3.9% as jobless claims rose 21k in September while average earnings growth slowed from 3.9% to 3.8%. ZEW's index of economic sentiment "recorded a very slight decrease" which did not affect the euro. Overnight New Zealand reported that inflation slowed to 1.5% in the third quarter, a higher-than-expected outcome. The Kiwi strengthened briefly on the news but still managed no more than an average day.
When the Bank of England governor attended Parliament's Treasury Committee, he gave his usual warning that a no-deal Brexit would mean business closures and job losses. He reassured the committee, though, that it would not pose an existential problem to Britain's banks.
Consumer price index data make up the bulk of today's ecostat agenda. Britain opens the batting, followed by Italy, Euroland and Canada. The Australian jobs numbers come out tonight.
Against the background of last-minute Brexit negotiations, the UK retail price index will be unusually insignificant. The headline rate of inflation is pencilled in at 0.8%. Euroland is up for 0.9% and Canada is expected to rise from 1.9% to 2.1%. The United States reports on retail sales. Australia is forecast to have added 15k jobs in September, with unemployment steady at 5.3%, but this set of data seldom goes to plan.
For sterling, the big one will be the outcome of the withdrawal discussions in Brussels. Success today would be only the first stage of a Brexit resolution: the EU27 would have to be convinced by the plan on Thursday and it would need the approval of the House of Commons on Saturday. In the next 72 hours, anything could happen.