Yesterday the Bank of England left interest rates on hold at 0.75% as expected but flagged "greater uncertainty" around the Brexit negotiations. A quarter of a percentage point rise last month took rates to the highest level since March 2009.
The Bank's Monetary Policy Committee (MPC) voted 9-0 to leave rates unchanged citing mounting fears about the UK leaving with the EU without a deal agreed. "Since the committee's previous meeting, there had been indications, most prominently in financial markets, of greater uncertainty about future developments in the withdrawal process," it said. However, it raised the forecast for UK economic growth in the third quarter from 0.4% to 0.5%, partly due to stronger consumer spending over the unusually warm summer.
The government published 28 technical notices covering the impact of a no-deal Brexit on areas ranging from environmental standards to certification for manufacturers. The government cautioned it would make life for UK citizens and businesses more complicated, more expensive and more bureaucratic.
The paper revealed that leaving the European Union without a divorce deal could increase Britons’ mobile phone roaming charges, upset data sharing and force motorists to get an international licence to drive in Europe. Recent signals from Brussels have buoyed hopes that the United Kingdom and the EU can agree and approve a proper divorce agreement before the UK leaves on March 29, though the sides are still divided on about one fifth of the detail of a deal. Brexit minister Dominic Raab said a no-deal Brexit was unlikely, but that the United Kingdom would manage the challenges and eventually flourish.
The European Central Bank also kept eurozone interest rates unchanged on Thursday. ECB kept policy unchanged as expected, staying on track to end bond purchases this year and raise interest rates next autumn, even as it warned that risks from protectionism were gaining prominence.
With inflation rebounding and growth levelling off at a relatively healthy pace, the ECB has been gently removing stimulus for months in the belief that a range of risks from trade disputes to emerging market turbulence and Brexit will not be enough to derail an economic expansion now in its sixth year.
President Mario Draghi focused on healthy domestic fundamentals, including rapid growth in employment and a rise in wages, which are expected to push inflation higher, even if only slowly.
The Dollar lost ground against a host of currencies after the US labour department said that consumer prices rose less than anticipated in August as declines in healthcare and clothing costs offset increases in the price of gasoline and rents.
Trade disputes continue to rock market sentiment around the globe after news emerged that the U.S. was seeking to reignite trade discussions with China. Sources familiar with the negotiations said the States was in the early stages of proposing a new round of trade talks with China in the near future.
This comes after a week of turmoil that saw China seeking permission from the World Trade Organization sanctions on the U.S., and President Donald Trump stating that he was "ready to go" on hitting China with additional tariffs. Consequently, an air of cautiousness lingers for markets around the world.
11:00 - GBP: BOE Gov Carney Speaks
13:30 – USD: Core Retail Sales m/m is expected to decrease to 0.5%
13:30 – USD: Retail Sales m/m is expected to fall to 0.4%