UPDATE: The British pound (GBP) was down slightly against the euro (EUR) as currency exchange markets entered the weekend. £1 bought €1.138, down from €1.1431 highs seen earlier on Friday.
Next week's calendar sees the 10-y Bond Auction, the Average Earnings Index 3m/y, the UK Claimant Count Change, the UK Unemployment Rate, the FPC Meeting Minutes, the UK CPI, the PPI Input, the RPI, the Core CPI, the HPI, the PPI Output, the CB Leading Index, the UK Retail Sales and the Public Sector Net Borrowing released. BOE Carney is also set to speak.
UPDATE: FX analysts at Scotiabank noted in a brief to clients on Friday afternoon, "Sterling is little changed on the day and heading for a modest gain on the week amid hopes that the EU and UK are moving closer towards a deal that can be showcased at next week’s EU summit."
"We still rather think the road to an agreement is highly uncertain as plans appear to revolve around the UK remaining in an effective customs union with the EU indefinitely after 2020."
"That is hardly equates to even the basic notion of “Brexit” and if it is PM May’s intention to push ahead with this idea, it may struggle to get through parliament."
A rise in Eurozone industrial production in August supported the Euro (EUR) exchange rates on Friday morning. Data showed that industrial production rallied 1.0% on the month, helping to alleviate some of the pressure created by recent Italian budget concerns.
The latest contingency papers for a no-deal Brexit have been published today, "with a warning about the future of the electricity supply in Northern Ireland" according to the BBC.
UPDATE: The British pound is facing continued pressure on Friday morning after Liam Fox, Michael Gove and Dominic Raab spoke out against the UK PM at a senior ministers Brexit meeting in Downing Street last night.
The Pound to Euro (GBP/EUR) exchange rate trended just -0.01% lower on Friday morning, priced at €1.14165.
UPDATE: Reports that the DUP is threatening to withdraw its support for the government over Brexit if it is not happy with the final deal have seen the pound fall against the G10 currency basket on Friday afternoon.
As Brexit speculation reaches fresh highs, the Pound Sterling exchange rates have seen a sea of red as markets head into the weekend.
Shifting market bets on the prospect of the UK and EU agreeing a Brexit deal on Monday saw the Pound Sterling to Euro (GBP/EUR) exchange rate come under pressure.
Investors began unwinding the odds of an imminent agreement in the wake of less optimistic comments from Irish officials.
As the Irish border issue reportedly remains unresolved the likelihood of a breakthrough looks limited, leaving the Pound on a generally weaker footing on Thursday morning.
While tensions between the Italian government and European Commission remain elevated this was not enough to keep the GBP/EUR exchange rate from trending lower at this stage.
A surprise contraction in September’s RICS house price index put additional pressure on the Pound, meanwhile, as confidence in the underlying health of the UK housing market weakened.
The latest quarterly Bank of England (BoE) credit conditions and bank liabilities surveys failed to encourage any GBP bullishness, with signs pointing towards a decline in lending.
With banks and building societies reining in credit availability the domestic mood appears to be turning increasingly cautious in the third quarter.
However, this is still likely to offer encouragement to BoE policymakers, as Howard Archer, Chief Economic Advisor for EY ITEM Club, noted:
While this decline in credit availability should ease worries over the resilience of UK households and the wider economy GBP exchange rates were still exposed to downside pressure.
Confidence in the Pound is likely to deteriorate further ahead of the weekend if worries over Brexit mount further.
Unless investors see signs that the UK and EU are likely to agree a deal next week the GBP/EUR exchange rate looks set to extend its losses.
Any increase in tensions between the two sides could weigh heavily on Pound demand, with markets still wary of the prospect of the UK leaving the EU without any deal in place.
Worries over the Italian budget are likely to remain a significant drag on EUR exchange rates in the days ahead, with markets bracing for EU authorities to reject the proposal.
Any escalation in the disagreement over Italy’s planned budget deficit could drive the Euro lower across the board in the near term.
Friday’s Eurozone industrial production data is forecast to put fresh pressure on the single currency as investors anticipate a fresh contraction.
Evidence of a continued slowdown in industrial output would fuel further doubts regarding the underlying health of the Eurozone economy.
With global trade tensions showing no signs of easing the Eurozone looks set to suffer from a further weakening of international demand, limiting the potential for an economic rebound.
On the other hand, if production picks up in August this could fuel hopes that the Eurozone economy recovered some of its lost momentum at the start of the third quarter.
The finalised German consumer price index data for September may also offer support to EUR exchange rates.
Confirmation that inflation within the Eurozone’s powerhouse economy strengthened should boost the odds of the European Central Bank (ECB) taking a more hawkish approach to monetary policy in the coming months.
Any downward revision, though, would give the GBP/EUR exchange rate a fresh rallying point.