Brexit trade rhetoric continues to have an important impact on Sterling and according to Northern Ireland Secretary Lewis, the UK would be breaking international law in a limited way with the Internal Market legislation. There were also media reports that Sir Jonathan Jones, the UK government's most senior lawyer had resigned amid opposition to proposed Withdrawal Agreement changes. The text of the Bill is due for release on Wednesday with the political reaction being watched closely.
German minister Scholz commented that the latest UK signals do not raise hopes for a Brexit deal and France stated that a deal was unattainable if the UK opposes a level playing field however, a spokesman for UK Prime Minister Johnson had stated that a deal was still achievable, although more realism is needed from the EU.
Latest reports indicate that the government will tighten coronavirus restrictions nationally to curb large gatherings of over 6, maintaining unease over an impact on economic recovery. Sterling remains on the defensive this morning, at 5-week lows against the Dollar at the 1.2935 mark whilst pushing lower against the Euro to 1.0990.
The US NFIB small-business confidence index increased slightly to 100.2 for August from 98.8 the previous month. There was an improvement in hiring plans for the month, although overall confidence in the economy was slightly weaker as coronavirus developments sapped support.
The IBD consumer confidence index declined to 45.0 for September from 46.8 previously, maintaining reservations over the outlook for spending and the economy.
The Dollar gained an element of defensive support as equities moved lower and strengthened against the Euro as the common currency retreated to lows just below 1.1770 before finding some support. The greenback holds a firm tone in global markets amid fragile risk sentiment.
Euro-zone second-quarter GDP was revised to a decline of 11.8% from the previous estimate of 12.1% with a 14.7% annual decline.
The common currency was unable to gain significant support yesterday with further evidence of position adjustment ahead of Thursday’s ECB policy meeting. There was increased caution over holding long Euro positions given the possibility of verbal intervention to weaken the currency or a stronger signal on forward guidance from President Lagarde.
As of writing, the Euro currently trades just above the 1.1770 against its US counterpart.
Data to watch
18:00 - USD - 10-y Bond auction
Posted in Daily Market News on Sep 9 2020