27/10/16 - Parliament will examine Brexit treaty

GBP

Sterling hit a two-day high on Wednesday after a government minister said both houses of parliament would have to examine any new treaty emerging from Britain's renegotiation of its relationship with the European Union. Sterling rallied after the comments from Brexit minister David Jones, having already been trading higher as expectations for a UK interest rate cut next week faded. 

In early September the BoE said it was likely to cut rates again this year if the economy slowed as it expected. But sterling's weakness and unexpectedly robust economic data have prompted most to rule out a Nov. 3 cut - around three quarters of the 60 economists polled by Reuters in the past few days expect rates to stay at 0.25 percent for the rest of the year. Carney said there were limits to the central bank's ability to overlook the effect of the steep slide - about 18 percent since the Brexit - on inflation, and it would "undoubtedly" take it into account at its rate-setting meeting next week.

USD

Purchases of new U.S. homes in September stayed close to an almost nine-year high, showing residential real estate was maintaining momentum heading into the quieter selling season. Sales climbed 3.1 percent to a 593,000 annualized rate from an August pace that was weaker than initially reported, Commerce Department data showed Wednesday. 

Durable employment gains and historically low mortgage rates are combining to lift housing demand, paving the way for homebuilding to contribute to economic growth. An acceleration in incomes and construction of entry-level properties would help provide an additional spark for the market.

The U.S. dollar fell against a basket of major currencies on Wednesday after touching a nearly nine-month high on Tuesday as the greenback looked vulnerable to weakness on uncertainty surrounding Federal Reserve monetary policy and the U.S. election.

Key Announcements

09.30 – GBP – Preliminary GDP QoQ; Forecast at 0.3% against a previous of 0.7%

13.30 – USD – Core Durable Goods Orders MoM; Forecast at 0.2% against a previous of -0.2%

13.30 – USD – Unemployment Claims; Forecast at 261k against a previous of 260k