heresa May yesterday pitched her idea to extend the UK’s transitional Brexit period to EU leaders in a bid to break the impasse over the Irish border, a plan that faced a fair amount of backlash within her own party. The Prime Minister earlier signalled that the EU’s proposals for the border were unacceptable, with EU leaders agreeing to shelve plans for an emergency summit in November amid insufficient progress made during negotiations.

Despite the October EU summit soft deadline being missed, talks will continue in the coming weeks with hopes of a deal being struck in either November or December, when the next official EU summit will take place. Until then, the Pound could remain susceptible to additional losses and a move below 1.30 today looks on the cards.

Euro slips on Italian budget stand-off

The Euro fell back below the 1.15 mark against the US Dollar on Thursday amid fresh concerns over the Italian budget. The European Commission yesterday pushed back on Italy’s budget deficit plans, saying that spending was too high and that its public debt would not lie within EU laws. The spread between Italian and German government bond yields, a measure of the inherent risk in investing in Italian assets, rose to a five-and-a-half year high off the back of the news.

Investors in the Eurozone will now place one eye on next Thursday’s European Central Bank meeting. No policy changes are expected, with currency markets instead focusing on the ECB’s view on inflation, namely whether they see an upturn in the core inflation measure in the coming months that would warrant higher interest rates.

FOMC member Bullard talks down more rate hikes

A fairly dovish set of comments from Federal Reserve member James Bullard didn’t help the US Dollar’s cause yesterday afternoon, although concerns over Italy’s budget dominated.

In fairly sharp contrast to the majority of the FOMC that talked up the possibility of additional hikes in the US, Bullard stated that he ‘does not think [the] Fed should ‘pencil in’ any more hikes. He stated that the current hike projections, which show the majority of rate setters on the board expect to raise rates on another three occasions next year, would take rates ‘quite a way’ into restrictive territory. It is worth noting, however, that Bullard is one of, if not the most dovish member on the committee and his dissent to higher rates would far from derail additional policy tightening in the coming quarters.

Fellow FOMC member Kaplan will be speaking in the US today. Other than that, today bodes to be a fairly quiet end to the week across the pond.