Good morning,
USD: GM and tariffs keep dollar mixed
Sterling did very little yesterday with the political cacophony thankfully dying off for 24 hours. The date for the meaningful vote has been set for December 11th and so the government has a little less than a fortnight to convince a majority of Parliament to back the plan and move forward with what they see as a strong Brexit plan. Between now and then we will see the government touch on security, international trade, immigration, fishing and transport. Today’s focus is the economy.
Chancellor Hammond was on BBC Breakfast this morning to lobby popular support for the deal, making two important statements. See if you can determine which statement is a fact and which is not. Hammond told the BBC that:
- Staying in the EU would be a better option for the UK economy
- Theresa May’s Brexit deal delivers an outcome “very close to the economic benefits of remaining in” the EU
Treasury estimates as to the impact of Brexit outcomes – remaining, leaving under this deal, leaving with no deal – are due to be published today and could be enough to drive the pound back into the arms of volatility.
The 1.27 level remains crucial for GBPUSD at the moment with either GBP weakness or USD strength likely to break that level and push the pair as low as 1.25.
At 10.30 this morning our Chief Economist, Jeremy Thomson-Cook, will be hosting a webinar where he will run through a few scenarios of what we think will happen with sterling and the various Brexit deals that may appear in the coming four months. You can register for free here.
USD: Confidence lower but dollar remains strong
US Consumer Confidence fell last month with the declines almost exclusively coming from falling expectations. The slight slip in US consumer confidence is off a 20-year peak and, despite the declines, US consumers are a lot more confident than they are in an average month. These declines will not lead to a drastic reappraisal of economic strength in the US but nobody wants to see consumer confidence lower.
All of the Fed speakers yesterday endorsed the central bank’s current plans with the obvious caveats that should the data change then the path of rates will do as well. Currently, markets are looking for two hikes next year in the United States.
Fed Governor Powell speaks this evening with the second revision of US GDP for Q3 also due this afternoon. Dollar strength is still a facet of economic strength and should we see the economic data remain strong then the greenback will be.
Have a great day.