President of the European Council, Donald Tusk, met with Theresa May earlier in the week following her Brexit speech and said that he is “cautiously optimistic about Theresa May’s constructive, more realistic tone on Brexit”.
Donald Tusk has openly said in the past that he wishes for Brexit to be reversed.
However, 4th round of Brexit negotiations which started on Monday, appear to have struck a slightly different tone. Minutes into the talks Brexit Secretary David Davis smashed the illusion that the UK was ready to be told what to do by the EU and made it clear that Britain will only pay the divorce bill if it gets the deal it wants. The markets are hoping for an update on the latest round of talks on Thursday.
The news of the meeting comes as the British Pound begins to give up some ground versus the US Dollar and most of its peers except for the Euro which has been hit by the Catalonia referendum scare and the German elections.
Today’s main data event is UK GDP (final) for Quarter 2 of 2017 where markets are expecting growth to have held at 0.3% for the quarter and 1.7% on an annual basis. The release is due at 09.30 am.
Fed chairwoman Janet Yellen, speaking at a conference of economists yesterday afternoon, acknowledged that the FED is puzzled by the persistence of low inflation and that it may have to adjust the timing of its interest rates policies accordingly.
Yellen stated that “the Fed will take care not to raise rates too quickly” but also said that “the central bank should avoid raising rates too slowly”. “Moving too gradually”, she suggested, “might eventually force the Fed to have to accelerate rate hikes and thereby elevate the risk of a recession”.
Most analysts expect the Fed to raise rates once more this year. Probably in December.
The German election outcome has dented sentiment towards the Euro but so has the impending referendum in Catalonia, Spain, which has not been well reported yet has the power to knock the Euro back even more as the EU would suffer another major blow.
The unofficial referendum on Catalonian independence from Spain is due this Sunday, October 1st.
Political tensions are rising in the region and the Spanish authorities have tried their best to disrupt the movement by making arrests and seizing ballot papers, however campaigners are set to hand out more than 1 Million ballot papers. The October 1st referendum was planned by the regional government in Catalonia and Spain’s attorney general has so far refused to rule out arresting the Catalan President.
The Pound has hit a ten-week high against the Euro over recent days and further gains cannot be ruled out just yet.
9.30 am – UK GDP (Q2, final): Expected to hold at 0.3% for Q2 and 1.7% YoY
1.30 pm – US durable goods orders (August): Expected to rise 1% from a 6.8% decline a month earlier
3.00 pm – US pending home sales (August)
10.00 am – Eurozone business confidence (September)
1.00 pm – German inflation (September, prelim): Expected to hold at 1.8%
1.30 pm – US GDP (Q2, final): GDP expected to be 1% in Q2 and 3% YoY
8.55 am – German unemployment (September): Expected to remain at 5.7%
10.00 am – Eurozone inflation (September, flash): Inflation expected to be 1.6% from 1.5% previously