07/12/2017 - No Breakthrough Made as Brexit Deadline looms 

GBP

Sterling slid yesterday amidst increasing concerns that a Brexit deal may not be reached before this December’s key EU summit. Irish Prime Minister Leo Varadkar yesterday said that the current deadlock is likely to continue into next year if no agreement is reached with regards to how the Irish border will operate following Brexit.

Progress in the negotiations has been recently stalled by the DUP which earlier in the week rejected the government’s proposals in relation to the border as we lead  Into  the December 4. deadline. Markets were originally betting on a breakthrough in the negotiations which would have allowed talks to move onto to trade.

Despite the recent setbacks, analysts have priced the possibility of a breakthrough at next week’s summit at 70 percent though some investors believe that this should be lower. There are growing fears that an inconclusive summit could mean a delay until February which may force businesses to scale back investment plans in Britain until the outcome of the talks become more certain.

USD

Concerns surrounding a possible U.S. government shutdown yesterday weighed in on the dollar, outweighing any optimism about progress on U.S. tax legislation. Analysts also said that the dollar was on course for a relatively quiet few days ahead before Friday’s non-farm payrolls report and the Feds policy meeting next week.

Earlier this week, the House of Republicans voted to go to conference with the Senate to begin formal negotiations on a tax reform bill. The senate is expected to hold a similar conference vote later this week which markets believe is a sign of progress in the reforms. However the possibility of a U.S. government shutdown looms if lawmakers fail to reach a budget accord this week. Government funding is set to expire on Friday.
 

Key Announcements

13:30 – USD:  Unemployment Claims; Forecast at 241K against a previous of 238K.

16:00 – EUR: ECB President Draghi Speaks