22/09/2017 - Markets Brace For Major Brexit Speech From Theresa May

GBP

Most of the headlines focused on Theresa May's plans to set out her "vision for a bold new economic partnership" with the EU and expectations she will propose a formal period of transition in a bid to offer "certainty and clarity" to business.

The Prime Minister’s hugely anticipated speech in Florence happening this afternoon is expected to set out her vision of a two-year "implementation period" to avoid the prospect of cliff-edge, and will outline a bespoke future trade model.

A report published yesterday indicated that May will signal the UK’s willingness to pay £17.65 billion to the European Union in the months after Brexit conditional on access to the single market. This has eased concerns that she would opt for a harder Brexit that would involve completely cutting all political and economic ties with the EU, an outcome that some members of her cabinet, namely foreign secretary Boris Johnson are in favour of.

However, whether the speech will do enough to allow negotiators to press on with talks on trade and transition, without giving a concrete guarantee on the sums, remains to be seen.

USD

The dollar offset losses yesterday following the release of strong data from the U.S. and news of potential monetary tightening by the Fed later this year.

The U.S. Department of Labour yesterday revealed that the number of individuals who filed for unemployment insurance for the first time during the past week actually fell from 282,000 to 259,000. Analysts had originally expected the figure to exceed the 300,000 mark. 

The positive data comes after the Fed concluded its two-day policy meeting on Wednesday by leaving interest rates unchanged. The central bank did however indicate that one more rate hike is likely this year but at the same time downgraded its inflation forecasts for the remainder of 2017 and 2018.

Key Announcements

EUR - 09:00 - ECB President Draghi speaks at Trinity college in Dublin

GBP - Tentative - Prime Minister May speaks about Britain's post-Brexit relationship with the European Union in Florence.