The UK’s Brexit Secretary, David Davis resigned from Government late last night as he felt he was no longer the best person to deliver Brexit, after the cabinet agreed to the new Brexit plan at Chequers on Friday. The new Brexit plan focuses on the UK’s future relationship with the bloc and maintaining 'a common rulebook for all goods’ with the EU. The plan sees the UK having ‘continued harmonisation’ with the EU, to avoid any friction at the borders. Although the cabinet agreed to this new plan, Davis saw it as the UK ‘giving too much and too easily’, he said he did not ‘believe’ in the new rules, prompting his decision to resign. The Pound has since traded higher against the Dollar and Euro, as the resignation has been seen as an opportunity for the UK to proceed with a soft Brexit.
The Dollar retreated against its major counter-parties on Friday as the US Wage Growth posted a disappointing 0.2%, down from 0.3% last month. The Unemployment Rate bearishly rose to 4% from 3.8% previously. However, this growth could be due to the Labour Participation Rate increasing to 62.9% from 62.7%. However, it was not all bad news for the Greenback as the Non-Farm Employment Change beat expectations for the second month in a row, posting 213k compared to the expected 195k. The Dollar’s decline was worsened by the tariffs imposed by the US on Friday. US President, Donald Trump announced the US would be imposing tariffs on $34bn of Chinese goods. China matched this announcement with a 25% tariff on 545 US products, which totals $34bn.
There is a quiet start to the week with no high tier data on the economic docket. European Central Bank President, Mario Draghi is scheduled to testify before both the European Parliament Economic and Monetary Affairs Committee and the European Parliament Economic and Monetary Affairs Committee. Back in the UK, the markets will continue to react to Brexit Secretary, David Davis’ resignation.
On Tuesday, the UK will be releasing the latest estimate of GDP. The previous reading posted 0.2% for the month on month figure, however the markets are still awaiting the surveyed economists’ forecasts for this reading. The Manufacturing Production Index for May is set to be released, expected to bounce back up from a disappointing -1.4% to 1.0%. Back in the EU, the German ZEW Economic Sentiment report will be released, with the index expected to continue its decline to post -17.9 from -16.1, as confidence in the six-month economic outlook continues to weaken.
Wednesday’s calendar is packed with central bank speakers. The first will be ECB President, Mario Draghi who will be delivering the open remarks at the ECB Statistics Conference. The next will be Bank of England Governor, Mark Carney, who will be speaking about the global financial crisis at the National Bureau of Economic Research conference. Across the pond, two voting members of the FOMC are expected to speak. One will be Federal Reserve Bank of Atlanta President, Raphael Bostic, who is due to speak at the Virginia Society of Certified Public Accountants. The other speaker is Federal Reserve Bank of New York President, John Williams, who will be speaking about the local economy in a town hall event.
In Canada, the Bank of Canada will release the Latest Monetary Policy report and Rate decision. The BOC are expected to raise rates from 1.25% to 1.5%, as growth has continued to remain in line with the forecasts, whilst inflation is expected to continue to growth.
The US will be the focus of Thursday as the latest reading of the CPI figure will be released. Although CPI is not the Fed’s preferred index of inflation, the reading is expected to uptick to 2.9% from 2.8%, which could provide the Greenback with some support. As well as providing the markets with further evidence to support the Fed raising trades twice more this year. The Unemployment Claims figure is expected to drop slightly from 231k last week to 227k.
Friday sees a quieter end to the week, with only medium tiered data on the economic docket. The US will be releasing the prelim University of Michigan Consumer Sentiment which is expected to uptick slightly to post 98.3 from 98.2. Back in the UK, MPC member Jon Cunliffe will be speaking at the Cumbria Chamber of Commerce.