Daily Brief

Daily Brief

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Anticlimax

Is that it?

On Thursday morning the mood was euphoric after reports that PM Theresa May was close to a withdrawal agreement with Europe. This morning - at least in the Far East - the anticlimax was almost palpable after all 28 EU leaders had given that agreement their imprimatur.

In a normal universe the agreement on the agreement would be positive for sterling: A compromise has been reached which leaves all 28 participants feeling slightly dissatisfied but better off than they feared. The world should move on. But on planet Brexit one of the 28 participants might be forced by a rebellious Parliament to renege on the deal.  It is that possibility - some say likelihood - that makes investors feel no easier about sterling than they did before the Brussels summit.

Compared with Thursday morning's levels the pound is an average of 0.4% firmer against the other major currencies, having added a third of a US cent and three quarters of a euro cent. Relative to Friday morning, though, it is on average fractionally lower. 

Giving thanks

Outside the Brexit bubble there were other distractions. America's Thanksgiving holiday dampened financial market activity and Black Friday provided investors with thousands of opportunities to get rid of unneeded pounds.

The top performer over the long weekend was the South African rand, which strengthened by a net 0.5%. It had a good week too, thanks to speculation that the South African Reserve Bank might increase its benchmark interest rate on Thursday. The SARB went on to do just that, lifting the repo rate from 6.5% to 6.75%, a level it last saw in February.

Provisional purchasing managers' index readings from Europe and the States were almost universally disappointing. Only the composite measure for France was above forecast and even that was lower on the month. The relatively bright spot on Friday was Canada, where inflation accelerated to 2.4% and retail sales increased by an above-forecast 0.2% in September.

A long weight

Now that the EU 27 are in agreement about Britain's withdrawal from the union, all that remains to be seen is whether Parliament is ready to endorse what the government has put together. That decisions could come on 12 December, until when the pound is likely to remain under pressure.

There is an assumption by the media that a majority of MPs will vote against the prime minister's deal, for a variety of ideological and practical reasons.  The uncertainty about what might happen afterwards - a second vote in the Commons, a second referendum, a second general election, a second coming even - will not easily be dispelled.

Today's agenda is rather more mundane. New Zealand has reported zero growth in retail sales for the third quarter. And Japan's leading economic index was a point lower in September at 114.4. IFO reports this morning on German business confidence and after lunch the Chicago and Dallas Federal Reserves will reveal their activity and manufacturing indices. New Zealand's trade figures come out tonight.

GBP sees no benefit from Brussels agreement

GBP sees no benefit from Brussels agreement

ZAR holds onto rate-inspired gains

ZAR holds onto rate-inspired gains

CAD higher on sales and CPI data

CAD higher on sales and CPI data

NZD awaits trade figures tonight

NZD awaits trade figures tonight

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