03/09/2018 – Sterling Falls As May And Barnier Clash

GBP

Sterling fell this morning as Brexit sentiment soured over the weekend following clashing comments from the EU’s chief negotiator Michel Barnier and UK prime minister Theresa May.

The fall came after Mr Barnier said he strongly opposed parts of Mrs May’s proposal for Brexit and the prime minister vowed to hold her ground on the UK leaving Europe.

The prime minister, writing in a tabloid paper, also said she would not “be pushed into accepting compromises on the Chequers proposals that are not in our national interest”.

The negotiations between the UK and the EU have an informal October deadline, but Mr Barnier said this could be extended to mid-November.

Separately, former Brexit secretary David Davis promised on Sunday to vote against Mrs May’s Brexit plan calling the Chequers proposal “worse than the [UK’s] existing deal” inside the EU.

EUR

On Friday a senior government official said Italy could exceed the European Union’s deficit ceiling next year if the extra spending is needed to make sure that the country’s infrastructure is safe. This comes despite Brussels calling for a “prudent” spending plan and following new data showing feeble economic growth.

“We must table with Europe a serious negotiation on this,” cabinet undersecretary Giancarlo Giorgetti said on the sidelines of a conference in Tuscany. He said a need to invest heavily in infrastructure could justify a 2019 deficit of more than 3 percent of gross domestic product, the maximum allowed under EU rules designed to ensure financial stability.

His comment sent a shiver through Italy’s sovereign bond market, propelling two-year yields to three-month highs and underlining investor concerns that a nation with the euro zone’s second largest debt burden could go on a major spending spree.

The state of Italy’s roads, bridges, schools and other public buildings have come under scrutiny since a viaduct collapsed in Genoa this month, killing 43 people. The disaster revived concerns about ageing infrastructure nationwide.

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09:30 – GBP: Manufacturing PMI expected to fall to 53.9