Mid-week report Report 26th - 28th September

Good morning everyone,

Overnight night UK PM May ruled out another election and said that a ‘no deal’ would be preferable to a Canada-style free trade agreement. She is due to speak today at the Bloomberg Global Business Forum in New York. The Labour Party conference concludes today, having indicated it would push for a second referendum if there is no election. Party leader Corbyn is due to make a speech.

Today’s UK data, including mortgage approvals and the CBI retail survey, are unlikely to significantly move sterling markets which remain focused on Brexit headlines. Euro markets will also take note of Italian finance minister Tria’s speech at 09:30BST, ahead of this week’s budget announcement deadline.

The main event today is the decision of the Federal Open Market Committee (FOMC), the US Federal Reserve’s interest rate setting body, at 19:00BST. It will almost certainly raise its policy interest rates by a quarter-point to 2.25%. Given the very high probability attached to today’s hike, markets are likely to be more interested in its signals for future policy moves in December and beyond. Markets will be looking to the post-meeting press statement, the FOMC forecast updates and Chairman Powell’s press conference (starting at 19:30BST) for insights. 

Brexit News

As Theresa May raises the stakes and the Labour Party scraps over the meaning of a second referendum, France makes clear why it’s playing tough.

French Finance Minister Bruno Le Maire is clear about why the European Union must not be generous with the U.K, It would be “suicidal” for the bloc. “I’m sorry to say it so callously, there is something more important for us than the future of the U.K, and that’s the future of the EU,” Le Maire told reporters in Paris. “Any decision that would give European citizens the feeling you can exit the EU and keep all the advantages would be suicidal, and we won’t make that decision.”

There are calmer voices. German Chancellor Angela Merkel said earlier this week she wanted a deal to be struck in “friendship.” Her party has also shown concern about the hardening in tone toward the U.K. While Germany says privately it is prepared to postpone some of the hardest decisions about the future relationship, the French say publicly that they won’t allow what they call a “blind Brexit.” Fudging some details will probably be key to getting a divorce deal done in time.

Irish Prime Minister Leo Varadkar also reckons a deal will be done in November. “Nobody wants us to end up in a no-deal scenario,” Varadkar said. “The damage for the U.K. would be immense, the damage for Ireland would also be immense — and it would have serious impact on other countries like Belgium and Holland and France and Denmark.” 

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