Mid-week report Report 20th - 21st August

Good morning everyone,


Overnight in Brexit news, European Commission President Juncker has said that a deal is "far away", while reports suggest that PM May will reject the EU’s revised proposals for the Irish border.

This morning we have the release of UK retail sales began Q3 on a strong footing, with the 0.9% increase in July boosted by the warm weather and extended discounting. Analysts anticipate a partial reversal in August and forecast a fall of 0.4% in this morning’s figures. 

Both the Swiss National Bank and Norges Bank will announce policy today. The SNB is expected to keep interest rates unchanged, but markets will be watching to see if it changes its language on the Swiss franc after its recent appreciation. The Norges Bank, meanwhile, is expected to raise interest rates by 25bp to 0.75%, the first rise since 2011, and is expected to signal further increases for next year.

The Eurozone focus will be on speeches by Bundesbank President Weidmann in Germany and ECB chief economist Praet in New York. 

US data releases today include weekly jobless claims, the Philadelphia Fed survey and the Conference Board’s leading economic indicator. Markets will be watching for potential signs of the impact of Hurricane Florence in the jobless claims data, but it is likely to be too early for the impact to show up. 

The pound is likely to remain sensitive to Brexit headlines. It had been buoyed by increasing expectations that a deal by November is within reach, although more recent headlines suggest outstanding issues remain. For now, sterling is still not far off recent highs against the US dollar and the euro. Recent UK economic data have broadly surprised on the upside, although we look for a larger-than-consensus fall in today’s UK retail sales report.

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