Markets are back into full swing as we welcome in September but the major issues are going to remain the same. First up our attention will be back on the UK. Parliament return from their little holiday and will be right into facing some heavy negotiations. The news flow started over the weekend already with David Davis stating he’ll be looking to throw a spanner in the works and vote against May’s Chequers proposal. No doubt he’ll find Boris Johnson and other opponents of May happy to support him.
This remains a huge concern for the pound. It’s outlook will continue to be linked to how Brexit is perceived and while last week’s recovery in GBP was welcomed, given the EU are willing to allow the UK favourable 3rd country agreements, once again we find ourselves facing the fact that the UK government cannot agree amongst themselves how Brexit should proceed, and until they can the EU will not be in a position to negotiate finer details. The result has been a weaker pound the start the week and this volatility is unlikely to subside over the coming months. We will also have some fundamental drivers for the UK as well. Manufacturing PMI data is due for release today with Construction PMI’s tomorrow and Service and Composite readings on Wednesday. There are also a number of BOE speakers due across the wires tomorrow morning. We can expect some GBP fireworks this week.
The rest of the calendar remains light today and it’s also a US bank holiday so the afternoon session will lack some if its normal fire. NAFTA 2.0 saw little progress into the weekend as there was no agreement with Canada. Trump might like to pretend he’ll go it alone without their northern neighbours but Mexico have already stated they’d prefer to see Canada at the table, while any agreement will still need to get approved by Congress. There was not too much reaction from USD or CAD on Friday, CAD had already weakened somewhat before no deal became evident and there was little reaction into the weekend. The USD has started the week slightly weaker.