Morning Brief – Thursday 4th

Unaccustomed Union:

The direction to markets today has been clear: Brexit is looking good and the Dollar’s rivals are back. With the Pound and the Euro both respectively seeing enormous bids on the back of Brexit progress, the Dollar has lost some of the traction that has made it the trade of 2018. The Irish government has spoken officially, giving weight and credibility to May’s proposed solution to the Irish border; perhaps the greatest sticking point in negotiations besides the bill! The Republic suggested it would allow a complete customs union between the EU and the UK, affording May’s extant plans greater credibility. The Pound rallied magnificently, breaking through 1.13 against an admirably performing Euro and confidently surpassing 1.30 against an ailing Dollar. Ahead of a pivotal EU summit this month, Ireland’s concession is important, removing one of the obstacles that the UK could face before the European Council. Emerging market sell offs are prevalent within equity markets, yet downward pressure is still evident within the Rand and the Lira. Non-farm payroll data is released tomorrow afternoon, with all eyes on the performance of the domestic US economy.

Since Market Open:

• GBP:   Ireland will accept a customs union with the UK after Brexit and supports backstop plans. The Pound and Euro rally, clawing back previous losses.

• EUR:   Post-Brexit trade is pivotal for the Eurozone too; the Euro advances back through 1.15 against the Dollar.

• USD:   There’s limited Dollar demand ahead of tomorrow’s much anticipated non-farm payrolls data. The Dollar slides as it loses ground to its rallying peers

• EM:    Stocks continue to underperform in emerging markets generating further losses for EM currencies alike.

Discussion and Analysis by Charles Porter

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