Sterling firmer against euro, dollar

Sterling has gained ground against both the euro and the dollar on reports that the UK and EU have reached an agreement on the so called ‘divorce bill’. This would help remove an obstacle to the Brexit talks moving on to discussing a new trade arrangement between the two, but progress on the Irish Border issue has still to be made before this can happen.

The UK currency is trading about a penny firmer against the euro at just under 88.5p – still within the range of circa 87.5p to 90.5p that has prevailed over the past couple of months – and has gained  around a cent against the dollar at over $1.34, still off mid-September’s high of about $1.36

Equity markets advanced further yesterday – the S& P 500 closed at a new record level – while yields in the core bond markets were again little changed on the day

Fed Chair-elect Powell says the case for raising interest rates at next month’s policy meeting is ‘coming together’, with the market now full priced for a 25bps hike. He also said the unemployment rate is likely to fall further, taking it below 4%, which would imply that interest rates are likely to increase further next year

Consumer confidence in the US rose to a 17-year high this month, according to the Conference Board’s latest survey, helped by a further improvement in respondents’ assessment of current labour market conditions

Data due today includes business and consumer confidence in the Euro area; mortgage approvals in the UK; and a second estimate of Q3 GDP growth is due in the US. Outgoing Fed Chair Yellen testifies to Congress on the outlook for the US economy and the implications for monetary policy