Currency traders are not getting too carried away and remain sceptical as to whether this plan is actually plausible. News this morning that Boris Johnson was planning to ask the Queen to suspend parliament in order to force through an exit has got the market worried, causing the pound to shed over half a percent of its value this morning. While we remain largely optimistic over the possibility of a deal, the lack of time for parliament to find a solution means that the risk of a ‘no deal’ are undoubtedly heightened.

On the macroeconomics front, there’s very little in terms of major UK data out this week. Sterling will therefore continue to be driven almost entirely by Brexit news.

China dismisses speculation of trade progress

The euro slipped back below the 1.11 mark against the US dollar yesterday afternoon, with the safe-haven currencies broadly stronger across the board amid concerns over global trade. China’s foreign ministry dismissed the US’s claim that there had been contact between the two countries aimed towards de-escalating the trade war. This more-or-less evaporated most of the optimism following Donald Trump’s comments on Monday that suggested a deal over trade could be in the offing.

The next 24 hours or so are relatively light in terms of major data out of both sides of the Atlantic, aside a couple of speeches from Fed members Barkin and Daly. Activity will pick up pace from tomorrow, with revised US growth numbers set to be released on Thursday. Then on Friday, we’ll have fresh Eurozone inflation numbers for August. Given the importance of this data point for ECB monetary policy, investors will be watching closely for any signs of a pick up in inflationary pressures.

That being said, even a significant upside surprise here is unlikely to prevent the European Central Bank from easing policy when it next meets in September. Expectations for a 10 b.p rate cut and possible reintroduction of the QE programme are likely to keep gains for the euro limited in the very near term.