Investors have paid more attention to Beijing’s recent comments which conclude that the country doesn’t have the plan to devalue its currency
US Futures and European markets are trading higher and picking up the momentum from Asia where investors have cheered the fact that China isn’t interested in devaluing its currency.
Can the U.K. and the EU break the Brexit deadlock? This is the question on investors mind today. The European Union has signalled their readiness to come to some sort of resolution. Today marks the first day out of the three key days for Brexit summit which could lead us to the path where both U.K. and the EU could resolve their conflict. Hopes are high that this will mark the path to success and one can see this by looking at the sterling strength against the dollar.
Theresa May has bolstered her support at home and later in the evening, she is expected to lay down her plan for Brexit. Her message so far has been clear that she isn’t prepared to carve out the piece of the U.K. but she is prepared to sign the deal if better terms are proposed.
So far, it is the U.K. which has been bowing to the EU’s demand so it may be not far-fetched to say that Theresa May would have to use the same technique again to get things over the line. This is because the pessimism is something which cannot be ignored, there is no guarantee that the EU leaders who are meeting in Salzburg would be able to conclude something rock solid. The conversation can easily navigate them to a no deal path as well. This is despite the fact that the block’s chief Brexit negotiator, Michael Barnier, has said that he is ready to improve the proposal.
Back in the equity markets over in Europe, investors have paid more attention to Beijing’s recent comments which conclude that the country doesn’t have the plan to devalue its currency to gain a competitive edge. This has stimulated the move in the Chinese Yuan. The currency has been under the hammer due to two reasons; sluggish domestic growth and impending trade war.
China has been blamed by the U.S. for devaluing its currency to gain a competitive edge. Over in Asia, we have seen that traders have felt more comfortable about China’s recent comments on currency devaluation and this has bolstered the Asian equity market.
In terms of economic data, U.K. inflation data is likely to show weaker reading which will bring inflation more in line with the Bank of England’s target. The bank’s target for inflation by years end is 2%. Remember, that the committee’s forecast back in August for inflation in Q4 was 2.3%
Under the current circumstances, it is likely that the inflation may touch 2% well before the year end and this would release the pressure on the bank when it comes to the matter of hiking the interest rates. On top of that, we do not expect the bank to move the needle on the interest rate any time soon as Brexit is the biggest threat.
