May offered Olive branch by Brussels as she battles Tory's
Week Commencing Monday 23rd September 2017
UK: GDP set to come in at 0.3 percent once again, signalling worst trio of results since 2012!
UK GDP growth is set to come in at 0.3 percent for the third quarter when official figures are published on Wednesday. This would mark the third consecutive quarter of growth at that rate, signalling the lowest rate of quarterly performance since the first half of 2012. It seems the pain is set to continue, as economists forecast a lacklustre end to the year and beginning of 2018 as consumers purchasing power is squeezed and Brexit woes continue to impact markets. Diving into the figures, third quarter GDP growth is likely to have been bolstered by strong industrial production performance while Services remained lacklustre.
BREXIT: Europe gives a little, but is it enough to keep May from crumbling!
Trade talks between the UK and EU27 may have inched a little closer last week, as European leaders seek to prop up Theresa May amid speculation she could be axed at any time. In a marked change in stance with the UK, leaders rallied to her defence stating that “issues were being exaggerated” and there is “no doubt” a Brexit deal will be reached. It is now understood that trade talks could start as soon as December, however the major sticking point remains the so-called Brexit bill.
SPAIN: Rajoy seeks to invoke article 155 to seize control of Catalan authorities!
Catalan separatists meet Monday to craft their reply to Prime Minister Mariano Rajoy after the Spanish leader announced an unprecedented number of measures to stamp Madrid’s authority on the region. Rajoy on Saturday shocked many observers with plans to clear out the entire separatist administration in Barcelona and take control of key institutions including public media and the police. Spain’s chief prosecutor said that if Catalan first minister Puigdemont declares independence he would face as much as 30 years in jail and signalled that he could be arrested immediately.
Sterling has performed well on the back of renewed Brexit momentum, having broken through the 1.12 level on GBP/EUR. With GDP our this week, we expect a mixed to bullish trend as we draw closer to the end of the week. Should we see further Brexit or further hints of a November rate hike, expect to see strong shifts in either direction.
The Greenback continues to trade within its range as Fed rate hike expectations continue to wain. With little in the way of economic data this week, we expect to see the Dollar trade within its range, potentially spiking on Friday’s GDP release should we see anything above 2.6 percent.
The Euro continues to perform strongly versus its peers, and with Mario Draghi’s press conference this week we expect this trend to continue. The only drag on the currency at present is pure geo-political risk, with ongoing Catalan and now Austrian/Slovenian elections. We expect these to have little effect this week, however given how fluid these risks are things could change quite quickly.
We have a light week for the UK with GDP the only release of note. Once again, we expect a print of 0.3 percent for the quarter, pushing the annual rate of expected growth to a mere 1.4 percent. Given general UK pessimism within the markets at the moment, any print to the upside should provide Sterling and UK assets with a welcome lift.
We have a busier week for the US, starting with Core Durable Goods on Wednesday. We expect to see a 0.5 percent print, while new home sales should come in with a solid 555k. Moving to Thursday, we expect to see Pending Home Sales come in at 0.2 percent versus last months -2.6 percent. Finally, US GDP should post a somewhat disappointing 2.6 percent annualised for the third quarter.
We have a light week for the Euro with the ECB meeting on Thursday the only release of note. We expect both the Deposit Rate and Interest Rate to remain the same at -0.4 and 0 percent respectively. The Press Conference could be interesting and as usual, any hint of policy shift or Brexit talk will impact FX markets.