This week seems to be all about putting rivalries aside! Word through the forex grapevine is that the EU is ready to offer the U.K. a Brexit deal unlike any other.
It’s no surprise that pound pairs kicked higher and lifted the mood on Wall Street once more, following through on the upbeat sentiment from the U.S.-Mexico trade deal earlier this week.
Meanwhile the mood was also a positive one in NAFTA negotiations, as officials acknowledged that talks have been productive. Heck, the POTUS is even predicting that a trilateral deal could be ready by Friday!
- U.K. Brexit minister Raab: Deal “within our sights”
- Raab: Aiming to strike a deal by October but has “measure of leeway”
- EU Brexit negotiator Barnier: Ready to offer unique partnership with U.K.
- Canadian current account deficit narrowed from C$17.5B to C$15.9B
- U.S. preliminary Q2 GDP upgraded from 4.1% to 4.2% vs. 4.0% consensus
- U.S. preliminary Q2 GDP price index unchanged at 3.0%
- EIA crude oil inventories down 2.6M barrels vs. projected 0.7M drop
- U.S. pending home sales sank 0.7% vs. projected 0.3% uptick
- Canada’s Freeland: Encouraged by progress of U.S. and Mexico, optimistic about talks this week
- Mexican President Nieto: “Optimistic that a trilateral deal can be reached”
- New Zealand building consents fell 10.3% after earlier 8.2% slide
Brexit deal unlike any other?
In a testimony before a committee of the House of Lords, U.K. Brexit minister Dominic Raab assured that he is “confident that a deal is within our sights.”
However, he also clarified that there is a “measure of leeway” when it comes to striking a deal by the next EU Summit in October, adding:
“I think it is important as we enter the final phase of the negotiations in the lead up to the October council, and the possibility that it may creep beyond that, we want to see some renewed energy.”
Although some lawmakers suggested giving in to some of the EU’s demands, Raab insisted that they “don’t beg” and that he’s “stubbornly optimistic” about getting an agreement that benefits both sides. He also mentioned that the possibility of not paying the €39 billion settlement is on the table if no deal is reached.
But what really led pound bulls to charge are the remarks of EU chief negotiator Michel Barnier to reporters in Berlin shortly after Raab’s comments:
“We are prepared to offer Britain a partnership such as there never has been with any other third country.”
And if there’s anything we learned from Kingsman, it’s that Brits do love bespoke suits, shoes, spy gadgets… and now a bespoke Brexit deal!
Barnier acknowledged that they “respect Britain’s red lines scrupulously” but added:
“In return, they must respect what we are. Single market means single market. There is no single market a la carte.”
Raab is headed back to Brussels to resume negotiations on Friday, with Barnier reportedly adjusting his busy schedule to make room for five hours of talks then.
More NAFTA optimism
Friday might also be the day to watch, NAFTA-wise, as U.S. President Trump said that they’re giving Canada until the end of the week to get on board.
This would make it just in time to reach Congress for its mandatory 90-day review and also be ready before the next Mexican administration steps into office in December.
As in her previous remarks, Canadian Foreign Minister Chrystia Freeland said that they are “optimistic about having some very good, productive conversations this week.”
In particular, Freeland pointed to significant concessions in wage provisions made by the U.S. and Mexico that will be beneficial for Canadian workers. After her meeting with U.S. Trade Representative Robert Lighthizer, she shared:
“This is a very intense moment in the negotiations and we’re trying to get a lot of things done very quickly.”
Canadian PM Trudeau clarified that they will not be pressured into a deal by Friday if it isn’t good for Canada. What issues are on the table, you ask? Make sure you’re up to speed by reading up on this nifty NAFTA primer.
Major Market Mover(s):
Pound pairs skyrocketed on the prospect of the U.K. getting an unprecedented customized deal from the EU, possibly leading to more constructive negotiations later in the week.
GBP/USD popped from a session low of 1.2864 to a high of 1.3033; GBP/JPY jumped from 143.28 to 145.60; EUR/GBP retreated to a low of .8983, GBP/NZD is up to 1.9411; and GBP/AUD rallied to 1.7825.
The Loonie pared most of its earlier losses thanks to an uptick in crude oil and another set of positive NAFTA updates.
USD/CAD fell from a session high of 1.2963 to 1.2854; CAD/JPY recovered from 85.90 to 86.55; EUR/CAD dipped to the 1.5100 mark; and AUD/CAD is down to .9436.
Watch Out For:
- 11:50 pm GMT: Japanese retail sales y/y (dip from 1.7% to 1.3% eyed)
- 1:00 am GMT: New Zealand ANZ business confidence index (previous reading at -44.9)
- 1:30 am GMT: Australia’s quarterly private capital expenditure (gain from 0.4% to 0.6% expected)
- 1:30 am GMT: Australian building approvals m/m (2.2% drop expected)
- Tentative: Australia’s new home sales (2.2% previous)