The Sunday Times is reporting that Four British ministers who back remaining in the European Union are on the verge of quitting Theresa May’s government over Brexit as the EU rejected once more May’s plan. The Irish border remains the main stumbling block. Over the weekend Senior Brexiteer Jacob Rees-Mogg and UK Trade Minister Liam Fox were quite bearish on the developments. GBP should come under pressure as the new week opens.
Themes for the Week Ahead:
- As of Friday, the combination of higher US yields, higher USD and tightening in the Libor/OIS started putting pressure on emerging markets and risk assets once again.
- The Brexit issues will continue to dictate Sterling flows in the week ahead amongst influential data releases.
- Italy has until Tuesday to submit a budget to the EU. Both sides remain far apart – with the EU requiring Italy to revise its 2019 budget so that it falls to 0.6% of GDP while Italy insists a rise of 0.8% is needed to support growth for its economy. Expect pressure on the Euro if the stalemate continues.
- China growth concerns are on the rise again and concerns are growing that China will allow the Yuan to weaken to offset the impact of slowing activity and impact of US trade tariffs. A break above the 7.00 level in the USD/CNH would likely put the entire EM complex under pressure. Comments from Trump regarding the coming meeting with Xi at the G20 will be closely watched by the markets, as will be some key China growth data to be released in the week ahead.
Data in the week ahead:
- Bank Holiday for US & Canada Monday
- UK sees Employment, CPI, Retail Sales
- AU sees Wage Price Index & Employment
- US CPI
- China IP, Retail Sales and Urban Investment will be released in the coming week, as the markets gauge whether or not recent stimulus has helped China maintain growth.
On the radar:
Given the Brexit headlines, I will have GBP (short) vs. USD/AUD/NZD high on the agenda this week. I also like EUR shorts vs. USD/AUD/NZD. Dow remains a buy on dips. Silver, amongst metals, turns to a sell on rallies.
About the Author
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