All eyes on EU summit

17 October, 2018

Rob Bastin

After a big drop over the weekend, the Pound has slowly recovered these losses in the last couple of days. This recovery was largely triggered yesterday morning after the results of August’s Unemployment data for the UK. Whilst there were no surprises with the headline rate which remained at 4%, there was a pleasant upside to the average earning figures which rose to 3.1%, the fastest rate for wage growth in 10 years. Whilst this sounds very positive the 10-year high is more indicative of just how poor wage growth has been since the financial crisis, and real term growth still only sits at 0.6% once offset against the 2.5% inflation rate over the last year.

This morning we will get the latest inflation figures for the UK at 9:30 am with the annual rate expected to rise from 2.7% in August to 2.8% last month, which would only further dampen the gains in wage growth seen yesterday. Eurozone inflation will also be announced today at 10 am.

Whilst there are more data releases for the UK this week, including Retails Sales on Thursday, all eyes will be on the EU Summit that begins today and runs through tomorrow.

Markets will be eagerly awaiting any update on whether a Brexit deal is likely to be done, however chances of a getting a deal are looking very slim at present with the Irish border proving to be an issue too difficult to satisfy all parties.

Yesterday Donald Tusk was quoted in a speech saying that the chances of a ‘No deal’ are currently more likely than ever before, and this likelihood will only increase with every week that passes without an agreement being reached. A ‘no deal’ is widely understood to be the worst case scenario for the UK economy, and indeed for the value of the Pound. With current buying rates close to multi-month highs, anyone needing to purchase currency in the coming months must weigh up whether the very real risk of rates dropping again is worth gambling on? For those who do have the appetite for this risk, talk to our brokers today about STOP LOSS order which can help you restrict the losses if rates do not go the way you hope.