Halifax reported a second successive monthly 1.6% increase in house prices with a year-on-year increase of 7.3% from 5.2%, the strongest rate since June 2016 as the RICS housing index also strengthened to 61% from 40% and the highest reading since June 2002 as the stamp-duty cut continued to spur activity.
Irish Foreign Minister Simon Coveney has stated that EU Brexit negotiator Michel Barnier will not sign off on any agreement without the UK moving on state aid and fishing. UK Chief Negotiator Frost stated that progress was being made, but the UK would trade on Australia terms if the agreement was reached. The UK government also reiterated that a deal was needed by October 15th and that it would quit negotiations if no agreement was in place by then. According to sources, Barnier expects talks to extend beyond the 15-16th.
Markets were also uneasy over coronavirus developments with further restrictions introduced in Scotland and expectations of further measures in parts of England within the next few days.
Sterling dipped to lows around 1.2845 against the Dollar and to 1.0915 against the Euro before recovering prior to the European close. Firmer global equities also helped underpin the Pound and trade rhetoric was slightly less abrasive despite ongoing political disagreements.
The dollar gradually lost some support yesterday as risk appetite attempted to stabilise, although there was little underlying conviction in currency moves with both units struggling for sustained fundamental support.
According to minutes from September’s Federal Reserve policy meeting, there was an upward revision to economic projections compared to the June meeting, but there was still a high degree of uncertainty. Most forecasts assumed further fiscal support and growth could decelerate at a faster pace without a new support package. In this context, there was some support for further monetary easing if fiscal support was missing. There was an extensive debate on forward guidance while most members considered that disinflation was a bigger threat than inflation despite some signs of rising inflation.
There were further concerns surrounding Euro-zone economic developments yesterday as concerns that the recovery is starting to fade, especially with fresh restrictions being imposed across many countries.
ECB President Lagarde has stated that the central bank will need to maintain ample stimulus to reach its goal while an ambitious and co-ordinated fiscal response remains essential. There was also speculation that the ECB would launch further monetary stimulus by the end of the year with an extension to bond purchases and more attractive terms for funding with expectations of further cuts in interest rates limited, curbing Euro selling.
As of writing, the Euro currently trades around the 1.1780 against the Dollar.
Data to watch
08:25 - GBP - BOE Gov Bailey Speaks
13:30 - USD - Unemployment Claims
Posted in Daily Market News on Oct 8 2020