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Changing the subject 2

Introduce us to a person who can’t get enough Brexit talk, we dare you! It's been going on so long with such little progress, that no one wants to talk about it. If they do, they’re likely a glutton for punishment, or an MP (not mutually exclusive). Everyone's just tired of the indecision and lack of meaningful conversation. Financial podcasts have actually begun providing ‘Brexit warnings’—much like you would have had spoiler alerts for Game of Thrones die-hards—so listeners can change over before the gloom sets in.

In fact, you can put the US-China trade negotiations in the same category. This morning a Bloomberg article wrote: ‘The US and China have each touted the idea that parts of the [trade agreement] text are close to complete. Is this supposed to impress us? Partial progress on phase one of potentially a three-or-more phase resolution provides little guidance on when a full accord might get ratified.’ The incremental disappointment is insufferable, mostly because financial markets seem frozen as a result, in a state of investment limbo.

The fundamental background isn’t helping either. It’s not like we can change the story by pointing to growth in some geography. The trend has been lower, investor sentiment leading actual sectoral performance, but this doesn’t need to prevail. In fact, if the EU agrees a Brexit deadline extension until January 31st, the rest of Q4 might respond positively to the resulting silence. Any partial US-China deal is likely to be slightly positive (mostly damp squib), and the Trump impeachment debates won’t occur until late January (Time has a handy timeline). There is every possibility for a new topic of conversation on the horizon, and that’s very positive in our book.

Bottom line: With seven proper working weeks remaining in 2019, we’re hoping to catch a little late-year wind in our sails. Central banks seem to be getting fed up with easing and momentum for productive government spending is really accelerating. All we need is the old baggage to get out of the way for a time and provide space for a new story to take hold.  


Last week, Sterling fell from five-month highs against the US Dollar and the Euro as positive Brexit developments ebbed. The Pound managed to hold onto most of October’s gains, keeping above 1.28 against the Dollar and 1.15 against the Euro. This week, the EU is expected to announce its Brexit extension offer, and Parliament will decide on whether to hold a general election. Further Brexit uncertainty is expected, so a move one way or another may only be temporary.

  • On Thursday morning, the GfK Consumer Confidence survey is expected to read -13, down from -12 last month. The survey has consistently been negative since Q1 2016, and the trend looks set to continue amid Brexit uncertainty.
  • Manufacturing PMIs will be released on Friday and expectations are a contractionary reading of 48.3 which would be the sixth contraction in a row. This would signal that Brexit uncertainty and the global economic slowdown is beginning to weigh on the UK’s manufacturing sector.


Last week, the trade-weighted Euro Index fell below its 50-daily moving average as demand for the US Dollar picked up. This translated in a 1% fall in EUR/USD, placing the pair back towards 1.1070. Weak European data continues to be released, and the risk of a technical recession in Germany remains high. If the data trend continues this week, further Euro weakness could be expected.

  • On Wednesday morning, German preliminary month-on-month CPI is expected to come in flat at 0.0% and unchanged from last month.
  • Thursday will see the Eurozone flash estimate CPI year-on-year stat released, and is expected to read 0.7%—significantly lower than the ECB’s target of close to 2.0%. What’s more, this low reading would be a downtick from the 0.9% print last month.


The US Dollar’s October decline rebounded from its 2.5% drop on a trade-weighted basis. The rebound coincided the 200-daily moving average, but the index hit resistance at the 100-daily moving average on Friday afternoon. A busy week for the Dollar includes the Fed’s monetary policy announcement along with the press conference that follows. Currently, markets are anticipating an interest rate cut of 25 basis points.

  • On Tuesday afternoon, the CB Consumer Confidence survey for October will be released. The survey measures household views on current and future economic conditions. Expectations are for a higher reading than last month at 128.2.
  • Wednesday will bring with it the release of the ADP Non-Farm Employment Change, providing an indication of what Friday’s Non-Farm Payrolls change could be. The reading is expected to be a 125k employment change, down from the 135k change last month.
  • On Thursday, consumer data will provide a health check of US households with month-on-month Personal Spending, which is due to post 0.3% expansion. This would signal the US consumer remains strong, which has been a growing concern in markets amid the global economic slowdown.
  • Friday’s Non-Farm Payrolls and ISM Manufacturing PMI will finish the busy week for the US Dollar. Expectations for Non-Farm Payrolls are for a 90k increase. Despite this increase, the unemployment rate looks set to increase from 3.5% to 3.6%. ISM Manufacturing PMI’s are forecast to come in higher than last month, but still in contraction territory at 49.0.