GBP/USD has posted losses on Monday, recovering much of the losses seen on Friday. In the North American session, the pair is trading at 1.3062, down 0.42% on the day. It’s a quiet start on the release front. In the UK, the sole event is BRC Retail Sales. In the U.S, banks are closed for Columbus Day and there are no U.S indicators on the schedule. On Tuesday, the BoE releases its Financial Policy Committee Statement.
Will Britain and the European Union reach an agreement over Brexit? Despite months of gloom and fears of a hard Brexit, there is renewed optimism in London and Brussels that a deal can be reached before the March 2019 deadline. There are reports that the sides have made progress on a range of issues, including the Irish border and continued EU access to London’s clearinghouses. EU leaders will hold a crucial meeting on October 17, with Brexit one of the key items on the agenda. If there are tangible signs of progress on Brexit ahead of the summit, the pound could move higher.
U.S employment numbers were a mix on Friday. Nonfarm payrolls dropped sharply to 134 thousand, its smallest gain in a year. This was well short of the estimate of 185 thousand. However, one factor in the disappointing release is Hurricane Florence, which led to many employees being unable to report to work during the storm. Wages appear headed in the right direction – Average Hourly Earnings gained 0.3% in September, and are up 2.9% on a year-to-year basis. The unemployment rate fell to 3.7%, its lowest level since 1969. The mixed numbers put a slight damper on the odds of a December hike, which dipped to 76% after the job releases, down from 80% prior to the releases. A December rate hike would be the fourth this year, with the Fed expected to raise rates another three times in 2019.
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