Macro Commentary

Another tumultuous week for Brexit, although little has actually changed. May survived the no-confidence vote, but the backstop continues to be a major issue. The prime minister continues to push for further concessions from the EU in order to appease MPs ahead of the crucial parliamentary vote. The date of the vote is yet to be confirmed but looks likely to be early January.

Brexit aside, the UK labour market remains buoyant, with data this week showing average earnings are up to 3.3%.

In the US, the market expects a further rate increase next week, taking the upper band to 2.5%.
Whilst in Europe, the ECB yesterday kept interest rate policy on hold, and confirmed they would stop net purchases under the QE program this month.

On the exchanges, sterling continues to be extremely volatile due to the ongoing political uncertainty.

GBP/USD dropped to our 1.2500 target on the postponement of the parliamentary vote, where it has found a base for now. 1.2750 is the initial topside level to watch from here.

GBP/EUR dropped towards the year-to-date low of 1.1000 earlier this week, and there remains strong buying interest at that level.

The initial topside target from here is 1.1250.

GBP/USD – 1-year chart

Week ahead

Date Release Last Expected*
19/12/18 UK CPI YoY  2.4%  2.3%
19/12/18 UK RPI YoY 3.3%  3.3%
19/12/18 US FOMC Rate Decision (Upper Bound) 2.25% 2.50%
20/12/18 UK Retail Sales 2.2%  2.0%
20/12/18 UK Bank of England Bank Rate 0.75% 0.75%
21/12/18 GDP YoY 1.5% 1.5%

*Bloomberg survey

Foreign Exchange

Currency Last Currency Last
EUR/USD 1.1340 AUD/USD 0.7170
GBP/USD 1.2600 USD/AED 3.6730
GBP/EUR 1.1110 GBP/AED 4.6275
USD/CHF 0.9950 EUR/AED 4.1650
USD/JPY 113.60 XAU/USD 1239

Equity Indices

Indices Previous Close YTD % Change
FTSE 100 6877 -11.37%
S&P 2650 -0.86%
EUROSTOXX 3112 -12.14%
DFM GENERAL INDEX 2599 -22.88%

UK Benchmark Rates

Libor   Swap Mid  
3 month 0.90000% 2 year 1.16%
6 month 1.02950% 3 year 1.23%
12 month 1.16431% 5 year 1.32%


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