It was generally thought the Prime Minister would need to map-out her exit before yesterday afternoon, but another day passes, and again, nothing changes. The Prime Minister remains unwilling to give ground on a customs union, a critical issue in gaining the support of opposition MPs and passing Brexit legislation. Labour has made some positive noises about the discussions, but no tangible progress is evident so far.
Chinese negotiators will resume trade talks in Washington today as they attempt to salvage a deal with the US. Regardless of the reason for this week’s change in rhetoric, the US has more to lose from a breakdown in talks than its Chinese counterparts. The DXY Dollar Index continues to sit below recent highs having surrendered ground to other safe-haven currencies. For a substantive increase in risk appetite and a weaker US Dollar, markets will need to wait for a concrete resolution to these discussions.
The Pound has traded in a very narrow range against the US Dollar in recent hours as an absence of economic news combined with no real progress on the main geopolitical stories resulted in no fresh direction. This theme could continue in the short-term, although developments in trade talks and Brexit will have the potential to initiate a breakout.
Again, there has been little fundamental news to provide fresh direction for the Euro against the US Dollar in recent trade, resulting in a very constrained market. Economic news remains thin on the ground today.
The Pound tested lows for the month against the Euro during yesterday’s session, primarily driven by the ongoing Brexit discord. This made for a third successive day of losses on the cross, the first time such a run has been recorded in over two weeks. In the absence of meaningful developments in cross-party Brexit talks, downside pressures are likely to prevail.