Another 24 hours of Brexit headlines but another day of no material substance. Today sees day 2 of the EU leader’s summit in Salzburg, Austria with leaders reiterating previous stances as EU Commissioner President Jean-Claude Juncker said a Brexit deal was “far away”. The Irish PM said there has been no progress in talks since March. Theresa May said there will be no extension to Britain’s membership to give negotiations more time. Previously the tone in both camps had grown more conciliatory in recent weeks and looking to get a deal done but yesterday the tone was definitely more harsh. From a currency perspective, the pound continued with its directionless intraday up and down movement. Initially the pound saw a mini rally yesterday morning in response to much stronger UK CPI data which saw inflation jump to 2.7% versus expectations of 2.4%. The pound moved about 0.4% versus the euro to 1.1157 (EURGBP low of .8963). GBPUSD saw a spike above 1.32 for the first time since the end of July.
The mini surge didn’t last too long with Brexit stories yet again putting a dampener on sterling’s fortunes with more news that the Summit saw further disagreement over a solution on the Irish border. This saw the pound very quickly gave back these small gains with GBPUSD rapidly dropping back to a low of 1.3101 and GBPEUR back to 1.1287 (EURGBP .8960). It doesn’t need me to tell you that this is all very repetitive and such news headlines shouldn’t impact FX markets this way. At this stage it’s important to ignore the noise and listen to the actual facts when they are easy. For today, sterling will continue to be driven by any developments from Salzburg plus we also have key Retails Sales figures out later this morning.
Elsewhere, generally markets seem to have taken a pause on the fears over the heightened US/China trade tensions. Equities seem a bit more content this morning after Asian markets posted marginal gains and most European bourses opening in a similar manner this morning too. Emerging markets too continued rally from the lows seen earlier this month. As a result the dollar remained weaker without being material.