Good morning,
European Union talks to continue
Day one of the Brexit negotiations ended amicably enough; nobody has walked out yet. The UK and the EU agreed on dates and priorities from the first round of negotiations. The EU has already gained one ‘win’ with the UK having to agree to the European’s plan for the sequencing of talks with discussions on the terms of exit – Ireland, Gibraltar and any ‘divorce’ payment – done before the discussions move on to trade.
The plan now is to have one week of talks a month with the time in-between used to work on the proposals. While the UK government has promised Parliament to not give a running commentary, the thing about negotiations is that there are always two parties and we think that the EU will be more than happy to update the press on how the talks are going. Both ships are also expected to leak like the Italian navy. Michel Barnier will provide the EU parliament with an update on the first few day’s talks on Thursday and the EU has committed to publish the progress of the negotiations as they are reviewed and approved by EU leaders during regular summits.
These take place every March, June, October and December.
The UK is set to make a decision on the rights of EU nationals in the UK by next week according to the Guardian newspaper.
Changes at the Bank of England
None of the Brexit chatter from yesterday had any effect on sterling and today’s GBP movement will likely stem from the publication of the Bank of England Governor Mark Carney’s Mansion House speech at 08.30 this morning. This follows the decision by the Bank of England’s Monetary Policy Committee to vote to hold interest rates at 0.25% in June by a margin of 5-3. One of the members who voted to hike rates last week will be leaving her post at the end of the month and her replacement was announced yesterday; Dr Kristen Forbes will be replaced by London School of Economics Professor Silvana Tenreyro.
Tenreyro certainly seems a little more dovish than Forbes and has previously advocated the usefulness of negative interest rates as they currently have in the Eurozone, Switzerland and Sweden.
Carney’s speech will be stripped for hints as to what the Governor thinks about the inflation trade-off that the Monetary Policy Committee is currently making as well as the disparity between wages and inflation and wages and unemployment amid fairly strong signs that the UK economy is weakening.
Dollar held up by Dudley
Elsewhere the USD consolidated some of the gains that it had made following comments from Federal Reserve member Bill Dudley that he too expects that the tightness in the labour market will eventually lead to inflation moving back towards target.
As yesterday, UK news is likely to remain political with other currencies largely quiet thanks to a rather empty data calendar. Summer doldrums trading may be here for a while.
Have a great day.