Will Brexit negotiations move on to the next stage?

Poor UK retail sales data weighed on Bank of England (BoE) rate hike expectations on Thursday, leaving the pound in a weaker position against most of its peers.

GBP/EUR remains below €1.1150, GBP/USD has dipped to $1.3121, GBP/AUD is little changed at AU$1.6723 and GBP/NZD is holding NZ$1.8776.

What should you be looking out for next week? Read on to find out…

What’s been happening?

A significant slide in UK retail sales in September saw Sterling lose ground on Thursday. Retail sales fell by -0.7% on the month rather than the -0.2% anticipated.

Given that the services sector is the driving force behind UK economic output, this sign of sliding consumer spending weighed on growth forecasts for the third quarter.

The pound was also feeling the pressure amid concerns that EU leaders won’t agree to the start of the second phase of Brexit negotiations.

According to Lloyds; ‘Despite the lobbying from UK PM May today’s EU leaders summit seems set to declare that insufficient progress has been made to justify moving Brexit negotiations on to the next stage. Instead the leaders will probably indicate that the situation will be reviewed in December. Other topics that are likely to be discussed include the ongoing separatist crisis in Catalan, the EU’s response to US President’s threat to walk away from the Iranian nuclear deal and the road map for greater Eurozone integration.’

Meanwhile, the New Zealand dollar remains in freefall after the announcement that the Labour party will be forming a coalition with NZ First.

What's coming up?

Influential UK data is limited until Wednesday of next week, when the nation will publish third quarter growth data.

A slowing in output may encourage the BoE to leave interest rates unchanged in November, weakening the pound in the process.

Other data to watch out for next week includes the Eurozone’s services and manufacturing PMIs and German IFO figures. However, the European Central Bank’s (ECB) interest rate decision will be the main cause of EUR fluctuations. Confirmation from the bank that it plans to taper quantitative easing would give the euro a lift.

Whether or not the US dollar is able to remain robust next week depends on whether the stream of US data (including manufacturing, services and durable goods figures) supports the case in favour of the Federal Reserve introducing higher borrowing costs in December.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Phil McHugh,
Trading Floor Manager

Phil provides dealing and hedging services whilst also helping to manage Currencies Direct overall market exposure.