UK government lays out consequences of ‘no deal’ Brexit

ains for Sterling remain hard to come by, and any rally that the UK currency does eke out has proved short lived amid concerns over a ‘no deal’ Brexit. The UK government yesterday released technical notices to businesses over the potential impact of a no deal. While we think that an agreement will be reached at some point before the end of the year, the very real possibility of a ‘no deal’ scenario has certainly caused many investors fearful of the extra risk premium to steer clear of the Pound in recent weeks.

Mortgage application data was the only economic news of note out this morning, although it was mostly overlooked by traders given its lack of influence on Bank of England monetary policy. Aside from that, today bodes to be a quiet end to the week in terms of economic announcements in the UK. Investors will now have one eye on next week’s inflation report hearings.

Fed Chair Powell to speak at Jackson Hole conference

Optimism over talks between the US and China over trade kept the greenback well supported against the Euro on Thursday, which remained on the back foot following yesterday’s soft set of PMIs. There has so far been nothing to come out of the talks with both parties moving forward with tariffs on $16bn worth of goods. Elsewhere, Fed Chair Jerome Powell allayed fears that Donald Trump’s opposition to higher interest rates may have an influence on US policy yesterday. Speaking in an interview with the Washington Post, Powell assured investors that the Fed would not be compromised, and would remain independent to support the US economy.

Powell will be front and centre during trading today when he speaks at the Jackson Hole Symposium. As we have mentioned earlier in the week, we expect another upbeat set of communications on the state of the US economy that would signal then central bank remains on course for another interest rate hike at the next monetary policy meeting in mid-September. It will be interesting to see, however, whether heightened trade tensions filter through to a slightly more cautious tone regarding hikes post-September.