Brexit talks on hold

Sterling is a little weaker this morning on the news over the weekend that the Brexit talks are on hold ahead of the EU Council meeting later this week, with the two sides unable to resolve some important issues most notably the backstop solution for the Irish Border. The pound, which had begun to edge off its recent high of around 87p against the euro towards the end of last week, is trading at just over 88p this morning, and at around $1.31 against the dollar

Theresa May says she still hopes progress can still be made at the EU summit, but this remains to be seen. She’s also facing increasing domestic political difficulties, with her former cabinet colleague, David Davis, urging ministers to rise up against her Chequers plan, while the DUP has reiterated that it will not support any Brexit deal that would see Northern Ireland differentiated from the rest of the UK

US equity markets shed around 4% last week, despite some modest recovery on Friday, with similar losses for European stocks. In tandem with the sell-off in equities, bond yields in the core markets ended a good bit lower on the week (by up to 10bps in the case of 10-year yields)

Fed member Evans says it is necessary to move up US interest rates to a neutral setting, which is considered to be around 3%, and perhaps a little beyond neutral

Data due over the week ahead include the latest labour market report and retail sales in the UK on Tuesday and Thursday respectively, while today sees the release of retail sales in the US with the minutes of the Fed’s recent monetary policy meeting published on Wednesday.