Article / 04 December 2017 at 8:00 GMT

Morning Markets: GBP steady as UK, EU finalise deal

Head of Editorial Content / Saxo Bank
Denmark

Morning Markets


Watchlist

  • UK: Construction PMI (0930 GMT)
  • EU: PPI (1000 GMT)
  • US: Manufacturers' Shipments, Inventories & Orders (1500 GMT)

It appears that London and Brussels are set to conclude their “divorce bill” arrangement today, with the UK prime minister off to the European Union capital to jointly prepare a draft text with European Commission president Jean-Clause Juncker.

Thorny issues surrounding Northern Ireland and the EU Court of Justice remain in play and could yet scupper the deal, but GBP has advanced on reports of a settlement and now sits at 1.3458 in dollar terms versus 1.3025 one month ago.

The pound may not have much further to rally, however as it recovers its negative uncertainty premium and heads into the reality of post-Brexit Britain. According to Santander G10 strategist Stuart Bennett, "a market that is already positioned for a breakthrough in the talks, as well as the possibility of the [Fed hiking rates] in December, could put a cap on sterling’s gains. "

"It might be a case of buy the rumor, sell the fact and if it doesn’t, the pound slips.”

Today’s Asian session saw the USD gain ground while equities were mixed. Firming commodities prices boosted materials shares in Australia, but these couldn’t hold the ASX 200 back from posting a slight 0.07% decline.

The ever-volatile Bitcoin, meanwhile, dipped to $10,400 overnight but is now back at the $11,430 level. In other big swings, Tencent declines 2% in the Hong Kong morning before surging to close 2.4% higher at the close.

Today sees the release of Eurozone PPI data at 1000 GMT.

Market signals

Asian session

  • Asia markets traded mixed late Monday morning on US tax-bill moves
  • The US Senate narrowly passed a tax-cut bill that will add $1.4 trillion to the federal deficit
  • The benchmark S&P/ASX 200 Index declined four points, or 0.07% to 5,985 
  • CVS Health will acquire Aetna for $69 billion making it this year's largest acquisition
  • China has banned unlicensed micro-loans and set a rate limit to ease financial risks
  • The e-commerce giant Alibaba has launched a $1.5bn fund to fight poverty in China
  • Japan's consumer confidence rose to a 50-month high in November
  • There was an outage on the New Zealand Stock Exchange that affected all vendors 
  • Malaysia's manufacturing PMI hit a 43-month high in November
  • That helped the ASEAN manufacturing PMI creep higher in November, to 50.8
  • Indonesia's manufacturing PMI lagged the rest of ASEAN; it rose to 50.4 in November
  • Australia’s competition regulator, the ACCC, says it will investigate Facebook and Google
  • It aims to see if they disrupted the media to the detriment of publishers and consumers
  • Australia's monthly MI inflation gauge showed a rise of 0.2% in November
  • Australian job ads rose for a second straight month in November to the highest since 2011
  • Quiksilver has made a bid for troubled Aussie surfwear firm Billabong
  • The value of gaming giant Tencent has tumbled by a hefty $55bn in just two weeks
  • UK plans tighter Bitcoin regulation amid concerns of money laundering and tax evasion
Forex ahead
  • The USD was broadly higher on Monday, reaching a 2-1/2-week peak against the yen
  • The euro slipped 0.18% to $1.1867 at 0600 GMT
  • The AUD slipped 0.21% and was trading at US7593¢ at 0600 GMT

From the Floor

Not over yet. "We need to see agreement on Northern Ireland if Brexit talks are to progress to trade," says Hardy.

Catalyst. "The US tax reform bill is the biggest reform since 1986," says Garnry.

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

Gold glimmers
Safe-haven buying returned to the gold market, with prices jumping on news that Michael Flynn had pled guilty to lying to the FBI, says Saxo Capital Markets (Australia).

USDJPY moves
There may be a big move in USDJPY as we approach the end of the year, which is when most funds close their books, says Saxo APAC Sales Trading.

Wrong reform
The US does not need a tax stimulus; it's not real reform, and it caters to the rich, who rely on passive investments, writes Kay Van-Petersen in his weekly Macro Monday column.

nnn
 Poverty is not obvious in cities like Shanghai (above), but it is common in remote areas, and
Alibaba founder Jack Ma has made a commitment to helping the rural poor. Photo: Shutterstock


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