Good morning,
Last night saw weekly highs on GBPEUR in the aftermath of Boris Johnson’s surprisingly successful trip to Berlin to meet Angela Merkel.
During the meeting, Johnson reiterated that the UK was looking for a deal, minus the backstop – to which Merkel responded by offering a 30-day timeframe to offer an alternative arrangement with regards to the Irish border. Johnson welcomed the “Blistering timetable” and departed the joint press conference all smiles and handshakes – the Prime Minister even took it upon himself to announce “Wir schaffen das!” – a line directly taped from Merkel in 2015.
It is worth remembering that, despite the EU’s fastidiousness regarding the unified position of the EU, the German automotive industry, in particular, has a tremendous amount to lose if faced with limited access to the UK consumer market.
Sadly, the same warm welcome was not extended on the other side of the Rhine.
Emmanuel Macron made it perfectly clear directly after the press conference in Berlin that the “Renegotiation of the terms currently proposed by the British is not an option that exists” – immediately scuppering any prolonged sterling pop above 1.0940.
Later in the evening, Macron returned with significantly more De Gaullist rhetoric by exclaiming “the British are attached to being a great power” whose seeming fondness towards a US free trade deal, would be “a strategic choice…at the cost of a historic vassalisation of Britain”
Not exactly the most constructive language needed for the pound in the run-up to the working lunch between the two leaders today – sterling could, as it always does, bounce on headlines coming out of the meeting.
In other news, as far as data releases go for today, German manufacturing data did post a stronger than expected result; with the same confidence carried into the rest of the Eurozone’s release at 9.00am – these bullish figures could add to a tough day for the pound when coupled with the above meeting of the minds.
We do also have service, jobless and manufacturing data out from the USA starting at 13.30 and closing at 14.45 GMT – now that President Trump’s plans to purchases Greenland have unbelievably not come to fruition; his focus will likely return to his steady the ship as his trade war with China begins to bite back home. Today’s numbers, if negative, will likely add to the consensus that the FED will announce further cuts tomorrow at 15.00 GMT when Federal Reserve Chair Jerome Powell speaks.
As mentioned yesterday, as we approach the bank holiday, markets are likely to thin out – it’s important not to be caught out by this, so give your account manager a call today discuss how to protect yourself before the end of the week.
Give us a ring on 02073269120 to discuss in more detail.
Have a great day,