EU Summit Comes to a Close Today

18 October, 2018

Simon Eastman

As the EU summit kicked off yesterday, all eyes were on the Brexit talks to see if any progress could be forged. With no announcements likely to come until this evening though, markets were left to deal with the usual eco stats which we had in abundance.

For the pound it was initially bad news, as the UK released its core inflation figures, while all the inflation readings came out higher than expected, the most relevant consumer price index actually dropped from 2.8 percent to 2.4 percent, moving further towards the Bank of England’s 2 percent target. Having been expecting a rise from last months 2.7 percent, this shows inflationary pressures dropping, leading away from the possibility the Bank might raise interest rates again, the main tool for curbing inflation. The result, was a drop for GBP/EUR and GBP/USD rates by half a cent.

This was halted when EU inflation came out, with consumer price index coming out as expected at 2.1 percent and core CPI actually falling short of the 1 percent expectation at 0.9 percent. This gave investors reason to sell off the single currency, which saw sterling gain back most of its losses over the day and the USD to rally a further half cent against sterling and half a cent against the euro.

After lunch the US markets opened with the release of some house build stats, which having come out lower than forecasts, meant the pound clawed back some of the cent it lost over the afternoons trade. All in all, sterling traded in a 1 cent range against both the euro and dollar, also losing out in the morning to most of its major pairings like the antipodean dollars and Scandinavian currencies, before making back gains in the afternoon.

As the EU summit comes to a close today, markets will wait to see if any positive Brexit chat comes out of Brussels, the UK sees the results of Septembers retail sales in the morning. The afternoon has a couple of Fed member speeches, fresh after the release of the latest Fed minutes, which all but reiterated the expected stance of rate rises quarterly throughout 2019.

Markets likely to remain jittery today ahead of any Brussels news so those with currency to buy, might be prudent to speak with one of the CI team this morning for some friendly guidance.