Global Market Watch - 16th October 2018
It may well be pertinent to note that Ireland’s Foreign Minister Coveney said that the Irish backstop must not be time limited as “insurance” for Ireland. UK MP’s in favour of Brexit are demanding a time limited period for the backstop because accepting an unlimited time in the customs union would be to accept the UK being under EU rule for an unlimited time. It is really now very simple, if the EU thinks it can force another UK referendum it will insist on no time limit to the Irish backstop and we could be on our way to a no deal. The PM now faces her cabinet this morning with the start of the EU summit on Wednesday and continuing on Thursday. We have UK average earnings for release today and expect growth of 2.6%. The market will also watch for the unemployment rate to slip below 4%.
The single currency managed to push higher alongside the CHF and JPY, as the market showed its concerns over the US equity market weakness, rather than concern over the local elections in Germany and Italy’s budget. However, as the ramifications of the German elections become clearer, Angela Merkel said that “the election has shown that even with excellent economic data and full employment, that is not enough for the people.” The market now waits for the EU'S response to the Italian budget, ZEW economic sentiment and the Eurozone trade balance.
The dollar softened most of yesterday as equity market fears were still high on the agenda and retail sales were soft. However, after a day of stability in the Dow Jones, the dollar has started to strengthen slightly. We have US industrial production for release today and expect a monthly increase of 0.2%, after August’s 0.4% rise.
The AUD managed to firm yesterday on dollar weakness but slipped overnight, after RBA meeting minutes said that a weaker currency is likely helping economic growth, while it reinforced that Australian interest rates will remain unchanged. The CAD had a good day yesterday as the oil price pushed higher and the BoC business outlook was very positive.