Brexit could return as the dominating theme in Europe this week
Friday saw both Sterling and the Euro gain ground on the US Dollar as an appetite for risk returned to the market stemming from easing trade concerns between the US and China. A report in the Wall Street Journal on Friday stated that negotiators between the two nations are aiming to be in a position to end their trade impasse before President Trump and Leader Xi Jinping are due to meet in November. The Euro also benefitted from the Turkish Lira stabilising on the back of a pledge of $15bn of support from Qatar in economic projects, investments and deposits for Turkey.
Brexit could return as the dominating theme in Europe this week due to the closure of Turkish financial markets in observance with Eid. Negotiations between the EU and UK resume on Tuesday with the UK ramping up preparations for a no deal scenario. Government papers have set out “how it works now” and “how it works in a no-deal scenario” designed to allow companies ample time to prepare however Dominic Rabb is quoted as saying “securing a deal is still by far the most likely outcome”. The Jackson Hole Symposium dominates the end of the week’s proceedings with markets keen for clarity on domestic issues such as the interest rate path going forward and how global risks i.e. trade wars and emerging markets crises might have an impact on these decisions and US growth as a whole.
With no notable data releases today, focus lies on speeches first by FOMC member Raphael Bostic and later German Buba president Jens Weidmann. Bostic is due to speak about the economic outlook in Tennessee at the City Chamber of Commerce and Weidmann will be delivering a speech at the Central Bank Research Association’s annual meeting discussing the relationship between monetary and macroprudential policies.
Light on data, the only notable release will be UK public sector net borrowing, expected to improve markedly on last month’s figure of a 4.5B deficit to a 2.1B surplus. Elsewhere, Dominic Rabb will travel to Brussels to resume Brexit talks with the EU’s chief negotiator Michel Barnier.
The key data release on Wednesday will be the minutes from the FOMC’s last meeting where the fed voted to leave rates unchanged. The minutes should provide readers with a detailed insight into the economic conditions in the US whilst also supporting the consensus view that the Fed will hike rates at their next meeting in September. US existing home sales are predicted to increase from 5.38m to 5.44m following 3 months of declining data.
Thursday begins with flash manufacturing and services PMI releases out of the Eurozone. With manufacturing data expected to repeat last month’s reading of 55.1 and services data expected to improve marginally to 54.4 from 54.2, markets will look for a signal from earlier PMI releases out of France and Germany as to whether the actual figure might fall short of or exceed these expectations. German Buba president Weidmann will be speaking at the Berlin Foreign Press Club. The ECB will release their monetary policy meeting accounts. As discussed above, Thursday is also the first day of the Jackson Hole Symposium held in Wyoming.
With no significant data out of the morning session, focus will shift to the release of US core durable goods orders where the month on month reading is expected to improve to 0.5% from 0.2% last month. Attention will then turn back to Jackson Hole where Fed Chair Jerome Powell is due to deliver a speech discussing monetary policy in a changing economy.