End of week Market Report
Good afternoon everyone,
Only minor data releases round off the week, leaving the focus on central bank speakers later this afternoon. The most attention, perhaps, will be on a number of central bank speakers. Among them will be BoE Governor Carney who speaks at the Economic Club of New York at 17:10BST. The Fed’s Kaplan and Bostic will also speak at separate events.
This weeks EU Summit turned out to be bit of an anticlimax as hopes faded of progress before the summit even begun. However, both the UK and EU believe the best option is to keep the U.K inside the European Union’s full membership rules for longer. This would give negotiators more time to resolve the biggest obstacle blocking a deal, how to avoid customs checks/hard boarder between the U.K. and Ireland, without erecting new barriers between Northern Ireland and the rest of the U.K.
The latest proposal to extend the transition period has gone down badly with May's party. Members of Parliament who back Brexit and those who don’t have lined up to criticize the move, which will inevitably cost the U.K. billions in EU budget contributions. Brexiteers are really struggling to come to the idea of staying bound by the EU rules any longer, while Remainers saw it as more evidence that a good deal simply can’t be done.
After the rather disappointing Salzburg Summit, this week, EU leaders were on their best behavior looking to avoid another disappointment. PM May’s address to her fellow leaders didn’t go down very well. Some were left confused and frustrated but her willingness to move her stance on the transition period has been greeted with a bit of flexibility on the EU side too, according to officials on both sides.
According to an EU official, the bloc decided that time is running out and they can’t afford any more breakdowns. If there’s one message May’s team will want to take home with them, it’s Merkel’s words: “I think that where there’s a will, there should be a way,” said the German leader, who later met PM May in Brussels for a one-on-one.
For anyone looking to sell their GBP (Sterling), the moment of reckoning has once again been pushed back, with traders now shifting their focus to a Dec. 13-14 summit. The cost of hedging swings in Sterling against the dollar over the next two months touched the highest in 19 months on Thursday. The pound was little changed at $1.3022 early on Friday and still holding close to €1.14 against the Euro.