GBP: Parliament returns and guess what’s top of the list
Parliament returns following their summer break today but instead of everyone telling each other what they did on their holidays, they will question Minister for Exiting the EU David Davis on the homework he had to do while school was out.
Indeed, Brexit is almost the only political game in town – we expect the government will announce the Public Sector Pay Cap will be lifted – and David Davis is expected to make a statement today updating MPs on his talks with EU negotiator Michel Barnier and the position papers published so far. Wednesday’s PMQs will likely be dominated by Brexit and Thursday will see MPs question Ministers from the Department for Exiting the EU and the second reading of the EU Withdrawal Bill ahead of a vote on Monday.
As we noted in our sterling update yesterday, the switch in Labour positioning plus the softening of red lines that has elicited little pushback from Tory leavers makes for an interesting political dynamic and there is little to suggest what Brexit means or looks like is any closer to being decided.
The next Brexit signpost will be a speech by Theresa May on September 21st in which she aims to speed up negotiations and focus on trade; this comes a few weeks before the European Council meeting wherein Barnier must report as to whether ‘sufficient progress’ has been made.
GBP: Services due following poor construction numbers
In stark contrast to Friday’s manufacturing sentiment numbers, the construction industry is looking very down in the mouth as a result of slowing government spending, uncertainty over Brexit and risks to the UK’s macroeconomic landscape. While imprecise, this could be used as a microcosm of the UK investment picture in a post-EU referendum atmosphere.
The services PMI is due at 09.30 and is expected to show a softening to around 53.5; anything above 50.0 is expansion with anything below signalling the sector is contraction. If the British Retail Consortium’s sales numbers are any indication – up 1.3% in the year to August – then the number could be one to help the pound although BRC chief executive Helen Dickinson said. “However, these figures tell a less positive story about the health of consumer spending that it might seem at first glance.”
USD: North Korea fears remain high
The diplomatic squeeze on North Korea tightened yesterday as the US started work on a fresh set of sanctions on the country and, more importantly, Chinese banks that aid its international trade. A lack of fresh provocation from Kim Jong Un yesterday has taken some of the demand out of haven assets although they remain elevated as we begin Tuesday’s session.
The US is back from its Labor Day holiday yesterday and so we could see some dollar volatility as the US opens up and catches up with a day out of the office.
The Day Ahead
Services PMIs and ISMs are the likely main movers of the day although US factory orders will be interesting to see in light of the recent uptick in US GDP.
Have a great day.