Sterling has only slightly pared back its gains from last week this morning, amid renewed attention on the tone of UK-EU relations. UK Government sources released statements to UK media over the weekend outlining the basics of their negotiating position, and reiterating earlier statements about being unwilling to accept alignment with EU regulations. Boris Johnson will elaborate on this position in a speech this morning, and, according to yesterday’s reports, will say the UK is willing to accept a bare-bones “Australia” style deal if negotiations for a more ambitious, “Canada” style deal fail. The EU's position will be similarly outlined in a draft paper presented by Michel Barnier today. Sterling’s muted sell-off today is a reminder that despite markets being dulled to heated rhetoric about red lined and the risk of disruption, Brexit headlines do retain some potential to move the markets.
The euro rallied on Friday, possibly benefitting from a negative impulse hitting the US dollar, but has made no further progress this morning. This week’s packed eurozone data calendar comes at a delicate time for the single currency, with two key risks looming in the form of slowing Chinese growth due to coronavirus, and trade tensions with the US. This has seen the release of manufacturing purchasing managers indices, which largely confirmed the findings from flash readings earlier in the month and showed a modest stabilization in the sector, amid signs of serious ongoing weakness in Germany. USD The dollar is on firmer ground this morning after a partial sell-off at the end of the month on Friday. Data, politics, and geopolitics will create a rich mix of narratives this week for global markets, with the dollar caught up in the middle as usual. Donald Trump’s impeachment trial in the Senate will fail this week, after Senate Republicans blocked the calling of witnesses. The outcome has little impact for markets, unlike the Presidential elections in November, which are increasingly likely to become a focus. Party members in Iowa will choose their preferred nominees for the presidency today. The choice of Democratic nominee will be important for markets, as candidates like Elizabeth Warren or Bernie Sanders will present a stark choice in terms of both geopolitics and domestic economic and social policies. Lifelong socialist Bernie Sanders has seen a recent surge in polls.