British Pound Jumps on Positive Brexit News, BoE Rate Statement Ahead

Market Reviews

The British pound jumped 0.5% against the US dollar after the announcement that the UK and the EU agreed on a financial service transactions after Brexit. US dollar, Canadian dollar and Japanese yen are weak. New Zealand dollar and Australian dollar are trading as the strongest ones on strong risk appetite.

The Australian dollar hit a week high on data from Australia and China. China Caixin PMI manufacturing rose 0.1 to 50.1 in October, matched expectations. Australia trade surplus widened to AUD 3.02B in September. Meanwhile, Australia AiG Performance of Manufacturing index dropped to 58.3, seasonally adjusted, in October, down from 59.0.

On stock markets, DOW closed up 0.97% at 25115.76. S&P 500 gained 1.09% to 2711.74. NASDAQ added 2.01% to 7305.90. Asian markets are mixed. Nikkei fell by 0.7%. But Hong Kong HSI added 1.84%, China Shanghai SSE rose 1.13% and Singapore Strait Times increased 1.16%.

It was reported, that UK Prime Minister Theresa May has made a preliminary deal with the European Union, which will give British financial companies access to European markets after Brexit. British and European negotiators have reached a preliminary agreement on all aspects of the future partnership in the service sector, as well as data exchange.

The Bank of England is widely expected to keep monetary policies unchanged today. It’s a year since the BoE raised borrowing costs for the first time in a decade, which was followed by a second small increase in August (to 0.75%). The Bank’s quarterly inflation report will also show if it’s any more optimistic about UK growth prospects. Investors also likely to focus on what Governor Mark Carney says about the state of the Brexit negotiations.

White House economic adviser Larry Kudlow said the additional tariffs on China are not “set in stone right now”. Kudlow also downplayed hopes for any breakthrough in trade talks between the US and China and when President Trump meets with Chinese President Xi Jinping next month in Argentina at the next meeting of G-20 nations. Kudlow also disputed prior reports that the meeting would determine whether Trump imposes additional tariffs on China.