As expected the Tory/Labour talks have collapsed. This is chiefly because nobody wants to be blamed for whatever fiasco ends up being resulting from Brexit.
Politics remain dominant factor into the weekend With little on the data calendar today, politics and headlines are likely to remain the driver of price action into the weekend. Overnight, China suggested that there was little interest in continuing the trade talks with the US as it sees a lack of “sincerity” in recent moves by the US. This further breakdown in sentiment has so far affected the Chinese markets more than the US, with USDCNH moving closer to the psychological level of 7.0 and equities falling by over 2%. For now, US equities are holding onto the recovery from Tuesday’s lows, but JPY crosses remain under pressure while the broader USD finding renewed strength. The Great British Pound remains under significant pressure and testing important technical levels (see charts below) as concerns increase again around Brexit. A statement from Graham Brady, the head of the UK Conservative backbench 1922 Committee, stated that he will meet with PM May to set a timetable for her departure as party leader following a Parliamentary vote on the EU Withdrawal Bill in the first week of June. Meanwhile, reports suggest that the cross party Brexit talks between the Tories and Labour are set to end today without a deal being struck. Data wise we get the final readings for April Eurozone CPI inflation, which are widely expected to remain unchanged from the initial estimate. That showed a big rise in annual ‘headline’ and ‘core’ inflation. However, much of those rises seemed to be due to Easter being at a different time this year, so may prove to be temporary. Eurozone March construction output surged by 3% in February, attributed to a mild winter. Already released data for Germany showed a rise of 1% in March, following a 4% gain.
We now look to next week's European elections for UK MEP's to provide some political direction for Sterling and the UK itself.
See you next week!
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