Mid-week report Report 17th - 20th October

Good morning everyone,

With Brexit negotiations between the UK and the EU currently deadlocked, European leaders are due to meet in Brussels today to try and break the current impasse. Expectations of an imminent breakthrough in the negotiations have slipped back in recent days following the UK PM’s rejection of the bloc’s proposals. PM May will brief EU leaders on her current Brexit position this evening, where she is expected to provide a potential solution to the Irish border, ahead of a summit dinner for the remaining 27 leaders.

Earlier this morning, Inflation data slumped to 2.4% in September, down from 2.7% in August, despite widespread expectations of a rise. The latest ONS statistics show that CPIH, which is now used as its headline measure and which includes owner occupiers’ housing costs, was 2.2% in September, down from 2.4% in August. The ONS said the largest downward contribution came from food and non-alcoholic beverages, as well as transport, recreation and culture, and clothing.

Overall Sterling exchange rates are holding up well in light of Brexit set backs and weaker inflation data this morning but tonight’s meeting of EU leaders will provide the next round of Sterling volatility in negotiations. 

Later today, two of the Bank of England’s deputy governors are due to speak publicly at separate events. Sir Jon Cunliffe will speak at his reappointment hearing before the Treasury Select Committee (14:15 BST), while Ben Broadbent is due to deliver a presentation on “Unconventional Monetary Policies in the Euro Area, Japan and the UK” in Washington (18:00 BST).

In the US, a light calendar day awaits with only housing and building permits data due. The minutes to the last FOMC meeting in September will be published this evening. The decision to raise policy rates by 25bps last month came as little surprise, and with markets expecting a hike in December, the focus will be on any discussions on the policy outlook for 2019 and beyond.

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