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Sterling suffers as Brexit talks continue

Fed Chair Powell says the US economy is in a good place and no policy response is required yet, while Boris Johnson admits there is still a substantial disagreement with the EU.

Centtrip: Sterling Suffers as Brexit Talks Continue

The Pound struggled again yesterday as markets reassessed whether Prime Minister Boris Johnson had made any progress in convincing the European Union to renegotiate the Brexit agreement. Johnson claimed yesterday he was prepared for talks to go down to the wire, until the 31 October deadline, and if necessary, to leave without a deal on that day. Subsequently, Sterling slumped 0.5 per cent against the Dollar to 1.2209.

Johnson’s comments spurred opposition leader Jeremy Corbyn’s claim that the Labour Party was ready to “stop the no-deal Brexit disaster in its tracks”. He also said a no-deal Brexit was “really a Trump-deal Brexit”.

Corbyn is planning to call a vote of no confidence in Johnson and his government when Parliament returns after summer recess. In his letter to senior opposition politicians, Corbyn said he was ready to step in as a temporary prime minister while seeking an extension to the Brexit deadline before calling a general election.

In Asian trading, the Yen rose by 0.4 per cent against the Dollar to an overnight high of 106.30 as the Japanese currency still appeals to investors who tempered their optimism of a quick resolution to the US-Chinese trade war.

The inversion of the curve for US two-year and 10-year Treasury yields continued, indicating a recession may still be on the cards.

However, following the G7 summit, US President Donald Trump claimed that Chinese officials had been in contact about restarting negotiations. This caused a brief uplift in equity markets, with the Dow Jones up 250 points, before China’s Ministry of Foreign Affairs rebuffed the claim. The Ministry of Commerce did not comment.

Chinese industrial profits rose by 2.6 per cent year on year in July – a marked improvement from the 3.1 per cent decline in June and a positive sign to the country that is desperate to see growth.

Today, Germany’s quarterly GDP data print showing a drop by 0.1 per cent was in line with expectation. The US will release the latest House Price Index data at 14:00 (BST), which is forecast at 0.2 per cent, and consumer confidence levels due at 15:00. Both are important indicators of broader economic trends that tend to dictate the direction of stock markets.

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