Summary:
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UK July GDP M/M: +0.3% vs +0.1% exp
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UK and Irish PM to discuss backstop
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GBPUSD remains near recent highs of $1.2350
A plethora of UK data points have painted a surprisingly healthy picture of the UK economy with the standout being a GDP print for July of +0.3% M/M. Following a flat reading in June this is a positive surprise and the accompanying rise in manufacturing production is also pleasing. While the figures are from from stellar, after a contraction in the second quarter the chances that we see a negative GDP print in the third have now dropped significantly, meaning that a technical recession will likely be avoided.
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Even though the latest UK data is a pleasant surprise, the longer term picture for industrial production and the manufacturing sector in general is far from pretty. Source: XTB Macrobond
Boris and Leo to discuss backstop
Politics continues to dominate the markets at the expense of economic data, with the coming days the seeing focus very much on the latest Brexit developments. The weekend offered no respite to the incessant headlines as a cabinet member resigned, reports emerged that Tory MPs who support remain had received assurances from the EU that an extension would be granted before news from France that an extension wouldn’t be permitted in the current climate. Today with see crunch talks between PM Boris Johnson and his Irish equivalent Leo Varadkar and while the latter is keen to downplay the chances of any breakthrough, at least the two most influential politicians with regards to the key stumbling block (the backstop arrangement) are finally in discussion. Simply put, unless there’s a new agreement to replace the backstop then any hopes of a new Brexit deal that is acceptable to both the EU and current UK parliament are extremely faint.
Better than expected UK data and conciliatory remarks from the UK PM have boosted the pound which remains not far from recent highs against the USD around 1.2350. Source: xStation
A joint press conference ahead of the negotiations provided a further boost in the pound with Boris Johnson taking a notbaly conciliatory tone. The UK PM declared an “abundance” of proposals to break the Brexit impasse while stressing that he would consider a no deal outcome a “failure” and that he would “overwhelmingly prefer to find an agreement”. The comments themselves amount to little more than hot air and are typical of the PM’s positive rhetoric on making a breakthrough, with the Irish Taoiseach unsurprisingly less enthusiastic. The chances of a breakthrough anytime soon remain remote but at least discussions are taking place. Elsewhere today, the bill to block no-deal is expected to receive royal assent and be signed into law with the focus now turning to the prospects of an early election.
Assuming the bill to block no-deal receives royal assent today, the attention now turns to the prospect of an early election in the UK. Source: The Independent
