Good morning,

Ready, set, go?

The gun is loaded but we will have to wait until the end of March next year for the shot to be fired; Brexit will begin in 2017 and all things being equal, the UK will no longer remain part of the European Union.

Theresa May laid out a smidge more detail on her Conservative party’s plans for Brexit at conference yesterday, mainly around the timing and the likelihood that the decision to adopt a policy more targeted towards immigration reform than membership of the single market. Immigration control as it stands is a bit of a moving target and indeed, we are unlikely to see targets placed on migration given the Cameron government’s inability to get within driving distance of its own self-imposed target. A cut will lead to border controls in excess of what we have now and plans mooted over the weekend have pointed to the launching of a scheme that will generate permits for foreign nationals to work in the UK.

Access to the single market would not be jeopardised by this. Tariff-free access to the single market would be however and that is a de facto worsening of our trade terms. David Davis and Boris Johnson who also spoke yesterday were unable or unwilling to expand on the PM’s words. Liam Fox, is due to take to the podium later however focus will largely fall on what new Chancellor Phillip Hammond may have up his sleeve.

Fiscal loosening but little detail

The Chancellor is due to say that “At the Autumn Statement in November I will set out our plan to deliver long-term fiscal sustainability, while responding to the consequences of uncertainty in the short-term and recognising the need for investment to build an economy that works for everyone.”

“A new plan for the new circumstances Britain faces.”

Plans for more housing are the likely announcements from the Communities Secretary Sajid Javid but Hammond will only likely expand on his plans to allow for slightly looser fiscal discipline than his predecessor. Hammond did tell Carney in the aftermath of the Bank of England’s Quarterly Inflation Report that the government would do “all that is necessary” to keep the UK economy firing. We will learn more in his Autumn Statement towards the end of November.

Pound close to 30 year lows

Sterling has slipped in the aftermath and now sits at just under a per cent above levels last seen in 1985. As we highlighted last week, pressures in options markets are going to see GBP remain depressed on the fears around Article 50.

The Day Ahead

Elsewhere we are enjoying a rather quiet open with the main story of Brexit only challenged by hopes/fears/expectations that news on Deutsche Bank may improve in the coming days. Impact on the euro has been negligible so far and the EUR’s correlation with risk has shifted in recent weeks to suggest that it is no longer the euro that is being used as a funding currency for carry trades; that onus has now fallen on the dollar and that is therefore allowing EURUSD to show a bit of backbone.

Overnight news from Asia has allowed a little bit of autumn sunlight on to markets and With China’s markets on holiday we can focus on European and the US. Italy’s PMI numbers are due at 08.45, France at 08.50, Germany at 08.55, and the Eurozone wide measure at 09.00 with the UK number due at 09.30. The US’s will be with us at 3pm and we expect, much like the golf, the American numbers to have the upper hand.

Have a great day.