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It’s been a long weekend in Downing Street; having forced the resignation of a second cabinet member in as many weeks, Prime Minister Theresa May woke up on Sunday to reports that 40 members of her own party were ready to commit to a vote of no confidence, just eight MPs shy of forcing a leadership battle. As the Pound starts the week on the back foot, what events this week, if any, could help the British currency recover?
Aside from talks of no confidence, Brexit negotiations will likely remain front and centre. David Davis, the Brexit minister, has said that the UK is unwilling to reveal a formula for calculating the country’s exit bill before a key EU summit in December, despite the EU asking for the information within the next fortnight in order to commit to the next stage of negotiations and end the current deadlock.
At least for the moment, lawmakers in Germany and the US could take the spotlight away from Downing Street.
German Chancellor Angela Merkel faces a self-imposed Thursday deadline to complete talks to form a so-called ‘Jamaica’ coalition. Although the election took place over 7 weeks ago, so far the three parties have been unable to reach agreement on a variety of issues, spurring all groups to agree to the formal deadline this week in order to set out the framework of a formal agreement. Despite having varying views on Europe, immigration and the environment, there are signs that each party is willing to concede some ground to the others. However, should the parties fail to reach an agreement by Thursday, it could prove to be a major hurdle for the EU as its largest economy remains without leadership. Could it even help the UK to attain a greater negotiating platform in Brexit talks?
Across the Atlantic, lawmakers in the House of Representatives will vote on Thursday to pass the lower house’s tax reform plan, the first step in the process of placing the Trump administration’s crucial policy into law. Whilst there are some variations from the Senate’s own plan – which was released last week – hopes are that the two sets of Republicans can quickly work together in order to sign an amended version of the two bills into law before the end of the year.
It may not be all plain sailing though. There remains some opposition from a minority of Republican Representatives, although House Speaker Paul Ryan is confident that this shouldn’t cause the bill to fail. The bill will remain open to the floor on Friday in case of problems, however, it is worth noting that even though the bill to repeal Obamacare passed through the Representatives, it failed at the Senate level.
A raft of central bank speakers could also take some of the heat from the politicians as a variety of major conferences this week feature impressive line ups of top tier speakers.
It begins with a trifecta of central bank heads appearing at the European Central Bank headquarters in Frankfurt. ECB Chief Mario Draghi, Bank of England Governor Mark Carney and Fed Chair Janet Yellen all appear together at 10am on Tuesday, with the star-studded line up discussing policy effectiveness. However, UK inflation data at 9:30am could provide a greater impact on Sterling should Consumer Price Inflation continue to accelerate past 3%, a whole percentage point above the Bank’s mandated target.
BoE Governor Carney then takes the stage by himself on Thursday at 2pm, before President Draghi delivers an address on Friday morning at 8:30am. Any hints as to the direction of monetary policy from the latter would likely affect the Euro, while comments from Carney may end up being lacking substance on the course of monetary policy given the BoE’s update earlier this month.
Date of note this week includes UK Inflation & House Prices (Tuesday; 9:30am), Eurozone GDP (Tuesday; 10am), UK Unemployment (Wednesday; 9:30am), Eurozone Inflation (Thursday; 10am), US Industrial and Manufacturing Production (Thursday; 1:30pm), US Housing Starts (1:30pm) and the US Kansas City Fed (Friday; 4pm).
Key data this week (Sign up here to receive our daily live macro-calendar)
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UK Economic Announcements
09:30 Inflation & House Prices
Intl Economic Announcements
02:00 Retail Sales, Industrial Prod, Fixed Asset Inv. (China)
07:00 GDP, CPI (Germany)
10:00 GDP, Industrial Production, ZEW Surveys (Eurozone)
10:00 Fed’s Yellen, ECB’s Draghi, BoE Carney speak
23:50 GDP (Japan)
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UK Economic Announcements
09:30 Unemployment, Wages
Intl Economic Announcements
13:30 Inflation, Wages, Retail Sales (USA)
15:30 Oil Inventories (USA)
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UK Economic Announcements
09:30 Retail Sales
14:00 BoE Governor Carney speaks
Intl Economic Announcements
10:00 CPI (Eurozone)
13:30 Weekly Jobless Claims, Philly Fed, Import/Export Prices (USA)
14:15 Industrial & Manufacturing Production (USA)
15:00 NAHB Housing Index (USA)
Intl Economic Announcements
08:30 ECB President Draghi speaks (Eurozone)
13:30 Housing Starts, Building Permits (USA)
16:00 Kansas City Fed (USA)
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