19/10/2018 - May Seeks Extension

GBP

Pound Sterling fell against the US Dollar and traded flat against the Euro as the fallout from the EU Brexit Summit became clear. Theresa May’s attempt to make headway on the Brexit talks appeared to take a big step back as she was resigned to make an offer to keep the UK signed up for an extra year as talks would need to be extended in order to finalise a trade deal. However in a statement, May did say that any extension would not lend itself to the implementation period.

Furthermore, the notion of a special Brexit summit in November was also rejected- a meeting originally pencilled in to sign off the withdrawal agreement and future trade framework. EU Council President Donald Tusk also appeared to pour cold water on May’s efforts as he was reported to have said that he did “not perceive anything substantially new in terms of content” from the British side.

The Irish Border Issue appears to remain the thorniest issue being negotiated, as May labelled the EU proposal on the Irish border as “unacceptable”. It seems that the earlier optimism from market traders on the border issue was slightly misplaced as no headway appears to have been made.

Outside of the EU Brexit Summit, there was the release of the UK Retail sales figures which came in underneath expectations. Retail sales volumes dropped by 0.8% in September from August, primarily caused by the largest decline in food purchases since October 2015. Like with the inflation and strong wage growth data earlier in the week, the pound remains focused on the nature of progress surrounding Brexit.

Key Announcements

09.30 – GBP: Public Sector Net Borrowing (Sept), expected to decrease to £4.6B from £5.889B
17.10 – GBP: BOE'’'s Governor Carney Speech