Brexit negotiations continue to scare Pound

Yesterday’s markets

18th July 2017

  • CNY - GDP q/y: 6.9%
  • CNY - Industrial Production y/y: 7.6%
  • NZD - CPI q/q: 0.0%

The second round of Brexit talks began yesterday in Brussels with Brexit secretary David Davies and EU negotiator Michel Barnier. The key issues and current negotiation points are Citizen Rights, the European Court of Justice, Trade agreements, Nuclear weapons, the role of Northern Ireland and, of course, the Brexit Bill. There seems to be steady progress so far, last week saw the UK negotiating and agreeing financial commitments. However, with still a long way to go, the Pound remains fragile.

Chinese data gave the Yuan a big boost early yesterday morning. The world’s second largest economy registered their GDP figures yesterday, with the number exceeding market expectations of 6.9%, aided mainly by industrial production which registered a whopping 1.1% better than expected at 7.6%, its highest level since 2015. However, debt continues to rise in China, and after a warning from the Chinese authorities, stocks tumbled. Markets are calling this a “gray rhino”, which describes a threatening and likely event that people should see coming, but do not.

Today’s markets

17th July 2017

  • AUD - Monetary Policy Meeting Minutes
  • GBP - CPI y/y
  • GBP - BOE Gov Carney Speaks 

Today, the markets will be focusing on the release of the CPI figure from the UK. The inflation rate is currently above the Bank of England’s target of 2%, registering 2.9% in June, reaching a four-year high. The release will be closely watched by the markets as the BOE are currently split on whether to raise interest rates next month to help bring the inflation rate back down towards the target. A higher CPI reading could encourage the current on-the-fence members of the MPC to vote for a rate rise next month, whereas a lower reading might take the pressure off the members to act now.