15/11/2018 - Brexit Withdrawal Passes Cabinet Test

GBP

The news that Theresa May had reached an agreement with the EU over the UK's withdrawal prompted an initial strengthening in the value of the pound as the possibility of a "no deal" scenario lessened slightly.

The pound initially rose against the dollar and the euro following the negotiations breakthrough - but analysts warned it could be short-lived, with the cabinet and Parliament yet to agree to the plans. The EU said it would "take stock" on Wednesday evening, while the Irish government said negotiations were "ongoing and have not concluded".

There is growing speculation in Brussels that the UK's Brexit Secretary Dominic Raab might be appearing alongside his EU counterpart Michel Barnier towards the back end of the month. Their joint appearance, looks more likely after the approval of the UK cabinet which was the result of a marathon discussion. It could happen quite quickly after the EU decides that sufficient progress has been made to arrange a summit of European leaders to approve to sign off the agreement. That get-together is being earmarked for 25 November.

EUR

The Euro outlook has dimmed further in recent days as economic and political turmoil are increasingly weighing on the single currency. The Italian crisis is at the forefront of the current decline of the Euro.

On Wednesday Italy re-submitted its draft 2019 budget to the European Commission with the same growth and deficit assumptions as a draft rejected for breaking European Union rules, stepping up its showdown with the EU over its fiscal policy. The only concession offered by Rome in the revised plan is to sell more state assets and to pay off debt faster.

European Central Bank policymaker Klaas Knot said Italy should comply with the rules or face higher borrowing costs because the ECB would not rush to the aid of any single country.

The European Commission now has the option of starting disciplinary steps against Rome over the structural deficit rise, and the unrealistic growth and debt assumptions. Attention now turns to 21st November when the European commission assess the revised Italian budget.

Key Announcements

09:30 - GBP: Retail Sales Figure (MoM) (Oct); Expected to increase to 0.2% from a previous -0.8%
13:30 - USD: Retail Sales Figure (MoM) (Oct); Expected to increase to 0.5% from a previous -0.1%
16:30 - USD: Fed Chair Jerome Powell Speech