Brexit, GDP Data, Central Banks Set The Tone For The Week

Monday will bring two crucial decisions for Brexit. Firstly, there is the extension of the October 31 deadline, which last week looked dead in the water after France’s President Macron pushed for a delay of only two weeks. But over the weekend he seems to have softened his stance because of the possibility of a general election and Brussels looks set to allow a delay until the end of January. The EU also plans to stipulate that there would be no renegotiation of the current proposal agreed with Boris Johnson.

Secondly the PM will put his general election proposal in front of MPs. Sterling spiked as soon as London markets opened, positioning itself for Boris Johnson winning approval for a December election. However, reality started sinking in quickly and the fact that the Prime Minister still needs to win a two-thirds majority in Parliament or 434 votes in favour for the election to go ahead. For the moment the pound is trading up 0.11% against the dollar and almost unchanged against the euro.

The FTSE 100 traded lower weighed down the most by HSBC (LON:HSBA) after the bank reported a 24% drop in quarterly profits.

US, EU GDP expected to show slowdown

Bond markets are looking at a very busy week both in the US and in Europe with GDP stats lined up for Thursday. Mario Draghi will hand over the helm of the ECB to Christine Lagarde just as the European GDP data is expected to show that the bloc's economic growth has almost completely lost any pulse and is growing at 0.1%, down from 0.2% in the previous quarter.

The Fed is going into its next rate-setting session on Tuesday and is widely expected to opt for another rate cut on Wednesday. If the Fed does cut rates it will be the third time in as many meetings but given that US GDP data due out on the same date is expected to show a slowdown in domestic growth there will be little reason for the Fed to continue with further cuts. The US economy grew at an annualised pace of 2% in the second quarter but the third quarter reading is expected to be closer to 1.6%.

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