Cable logged a seven-week high at 1.3175 before settling lower ahead of the key inflation data. Expectations are for the headline rate to have slowed to 2.4% y/y in August, from 2.5% y/y in July. The more important core number is also expected to decline to 1.8% y/y from 1.9% y/y for the corresponding months. Inflation is expected to slip as wages and earnings are showing some signs of life, but the main driver of Sterling remains Brexit news.
On the Brexit negotiation front, there’s been a mixture of dire warnings about the consequences of the UK leaving the EU without a new deal in place, alongside some replaying of positive mood music by various EU officials with regard the achievability of reaching a deal, accompanied by UK’s Brexit minister Dominic Raab’s own uplifting tunes. EU leaders will meet to discuss Brexit in Salzburg this Thursday, though we don’t expect much scope for a breakthrough until after the Conservative Party’s annual conference on September 30th – October 3rd. What the EU leaders are expected to agree on, is to hold an extraordinary meeting in November to sign off on a deal on future relations. Cable has support at 1.3048-55.
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