Sterling pulled back on Friday ahead of the weekend with Brexit uncertainty continuing to drain confidence within the markets, with the outcome of the General Election Motion today and EU stance towards a further extension likely to drive further moves. There were reports that France would only back an extension until November 30th, but other reports suggest that an extension to January 31st with the potential for an early exit at the end of November and December. In addition, an added clause that has been mentioned is that there will be no scope for the withdrawal agreement to be reopened in the future.
Today the House of Commons will debate whether to approve a December 12 General Election with expectations that it will be rejected amid parliamentary deadlock. In order to pass, it will require a two thirds majority. Labour are expected to reject the idea and will only vote for it if “no deal” is taken off the table. The EU will also hold a final meeting to decide its extension stance, this may be dependent on the outcome for a General Election. Today’s data releases will probably generate limited market interest. They include the UK CBI retail survey, Eurozone money data, and US regional surveys and trade figures.
Outside of Brexit, the German IFO (a sentiment index) was unchanged, marginally below expectations. There was a small decline in the current assessment which was offset by a slight gain in the expectation’s component and the IFO stated that business confidence had stabilised. The market will continue to monitor this following the re-introduction of quantitative easing with the ECB confirming that its bond-buying programme would resume on October 30th.
Fed interest rate decision this week
In the US trading session, the University of Michigan consumer confidence was revised slightly lower and markets have priced in a further Fed rate cut this week (93% probability) but the Dollar gained some support on expectations of less dovish forward guidance.
As we approach what could be the endgame with Brexit, Sterling may continue to be volatile. If you have any questions, require a live execution price or some added information regarding a hedging strategy to potentially reduce currency volatility, please contact us via email or directly on 0203 384 7280.