Mid-week report Report 31st - August - 2nd November.

Good afternoon everyone,

UK confidence has fallen again, with the Lloyds Business Barometer dropping to 19 from 29 earlier this morning but this did nothing to hurt Sterling exchange rates even with GfK consumer confidence slipping to -10 from -9, likely due to Brexit uncertainty.

In the US, the employment cost index for Q3 will provide an update on the pace of growth of in labour costs. The ECI is a more comprehensive but less timely measure of wages than the monthly series, which is released with the labour market report on Friday. As that indicator is now suggesting that wage growth is accelerating it will be interesting to see if the ECI confirms that trend. We forecast a quarterly rise of 0.8% up from 0.6% in Q2.

Brexit News

Some EU diplomats speculate that an agreement won’t be wrapped up until a summit in December. Some even see negotiations moving into the New Year but the U.K. has always indicated that this is too late. Two British officials told Bloomberg late yesterday, the ambition is still for the deal to be wrapped up in the coming month. If leaders don’t meet until December, that should largely be a signing ceremony. 

The EU is more relaxed about the ticking clock than is the U.K. But officials in Brussels do understand the constraints that Britain is under. For British negotiators, it’s about the time needed to pass legislation through Parliament. 

Bloomberg also reports that Monday’s budget opened a path for PM May to restart talks and the possibility of a window of opportunity if she comes up with some concessions now. The ones that are floating about already are: tying the U.K. to the EU for longer than her party wants and/or agreeing to let Northern Ireland be treated differently than the rest of Great Britain when it comes to customs and regulatory standards. The U.K.’s chief negotiator,  Olly Robbins, was back in Brussels yesterday. Today, the EU’s 27 ambassadors discuss the latest with the European Commission. 

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