Macro Commentary

Further developments on Brexit this week have, if anything caused even more uncertainty as we head into next week’s crucial vote.

Prime minister May looks set to lose the vote, with the market focused on just how big a margin it may be. The next steps could be a no-confidence vote, or May trying to renegotiate with the EU. Potentially a second vote, or a general election, although both unlikely, remain a possibility.

In Europe, the ongoing dispute between Italy and the EU on the Italian budgetary plans continue to weigh on the Euro.

Whilst in the US, although a temporary pause has been agreed with China on the trade dispute, nothing has been resolved and market concerns remain high.

On the exchanges, sterling remains under pressure with the political uncertainty so high ahead of next week’s critical vote.

GBP/USD is holding above the 1.2700 level for now, but a closing break below the August low of 1.2665 could lead to a test of 1.2500.

GBP/EUR is currently holding above the 1.1200 support, and there remains some buying interest below that level, but sentiment remains extremely negative.

GBP/USD – 1-year chart

Week ahead

Date Release Last Expected*
10/12/18 UK Trade Balance  -£27m -£1100m
10/12/18 UK Industrial Prod. YoY 0.0%  -0.1%
10/12/18 UK Manufacturing Prod. YoY 0.5%  -0.1%
10/12/18 UK Monthly GDM 3M/3M Change 0.4% 0.3%
11/12/18 UK Average Weekly Earns. Ex-Bonus 3M/YoY 3.2% 3.2%

*Bloomberg survey

Equity Indices

Indices Previous Close YTD % Change
FTSE 100 6704 -11.43%
S&P 2695 +0.84%
EUROSTOXX 3045 -12.08%
DFM GENERAL INDEX 2580 -23.44%

Foreign Exchange

Currency Last Currency Last
EUR/USD 1.1380 AUD/USD 0.7225
GBP/USD 1.2755 USD/AED 3.6730
GBP/EUR 1.1210 GBP/AED 4.6860
USD/CHF 0.9930 EUR/AED 4.1800
USD/JPY 112.80 XAU/USD 1240

UK Benchmark Rates

Libor   Swap Mid  
3 month 0.90169% 2 year 1.16%
6 month 1.02081% 3 year 1.24%
12 month 1.15756% 5 year 1.32%


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