Markets brace for UK inflation data as ‘hard Brexit’ risks recede – business live

City traders should also take note that Michel Barnier, the EU’s chief Brexit negotiator, is running out of patience.

Barnier has told the Financial Times that Britain risks crashing out of the EU in March 2019 without a deal on future relations if it “wastes” more time.

Barnier pointed out that no progress has been made since Britain triggered Article 50 in March, saying:

“Next week, it will be three months after the sending of the Article 50 letter.

“We haven’t negotiated, we haven’t progressed. Thus we must begin this negotiation. We are ready as soon as the UK itself is ready.”

In a sign of exasperation, Barnier even pointed out that he can’t negotiate with himself!

Here’s some reaction from our Brussels correspondent, Jennifer Rankin:

As the dust settles from last week’s general election, economists are coming to the conclusion that Britain is less likely to exit the EU with a ‘hard Brexit’.

That’s according to a new poll of City experts from Reuters, who say:

The chances of Britain ending up outside the single market when Brexit talks are concluded have receded somewhat after last week’s election, although the pound might weaken further against other currencies, a Reuters poll of economists found.

Around two-thirds of the economists polled this week, 33 out of 49, said the chance of a hard Brexit had receded somewhat.

Three said it had receded significantly, while eight said there was no change.

Five said it had increased somewhat and none said increased significantly.

“The prime minister may have to change her stance and approach to Brexit following the election outcome,” said Nikesh Sawjani at Lloyds Banking Group.

More here: Likelihood of hard Brexit recedes after UK election – Reuters poll of economists

Good morning, and welcome to our rolling coverage of the financial markets, the world economy, the eurozone and business.

We’re about to find out how much damage the weak pound did to UK household budgets.

New inflation data, due at 9.30am, is expected to show that prices rose by 2.7% year-on-year in May.

That would match the four-year high struck in April, and mean that prices in the shops are rising faster than wages [which only rose by 2.1% in the year to March].

Michael Hewson of CMC Markets says the figures come at a crucial time for the economy:

We get to look under the bonnet of the UK economy this week, at a time when there is rising evidence that the UK consumer having enjoyed a post Brexit shopping spree is now scaling back as inflation starts to eat away at average earnings.

Having started this year at 1.8% CPI inflation hit 2.7% in April and looks set to stay at this level in the latest May numbers which are due out later this morning. Core prices have also jumped sharply since the beginning of the year from 1.6% to 2.4% in April, though we are expected to see a slight moderation in the May numbers to 2.3%.

There could be a silver lining given recent falls in oil prices, which might suggest that we’ve seen a short term plateau for prices which could see prices start to fall back. Input prices in the last few months have shown some signs of falling back, and in both the US and the EU inflation has shown some signs of falling back which would be good news for hard pressed consumers, when wages are currently lagging behind.

We also get a new report on Britain’s housing market, which may show that prices rose at a slower rate in April.

So it will be a busy morning for City traders, who’ll have one eye on the economic data, and the other one on political developments after Britain’s general election.

The pound has clawed back a little ground this morning, after hitting eight-month lows against the euro yesterday. It’s currently trading around €1.132, up 0.2%.

Today, prime minister Theresa May is meeting DUP leader Arlene Foster to discuss a possible deal to prop up a minority Conservative administration.

Last night, the PM apologised to her backbenchers for leading the party into such a mess. Senior colleagues have been making supportive noises, but May still looks weak and vulnerable – even if her premiership isn’t over quite yet.

Also coming up today..

Brussels is expected to announce new proposals for how euro-denominated securities are cleared. That’s important for London, which currently dominates this market but could lose this lucrative (and important) business after Brexit.

City AM has the details:

The City is bracing itself for the European Commission’s proposed changes to the European Market Infrastructure Regulation (Emir), due out on Tuesday morning.

Brussels sources told City A.M. the proposals will include a mechanism giving the EU power to force relocation of euro clearing activity, which is currently dominated by London.

A source familiar with the plans told City A.M.: “The commission is not going for the nuclear option.”

The “nuclear option” would have seen the commission require all clearing of euro-denominated derivatives to take place within the EU…

European stock markets are expected to rise this morning, with the FTSE 100 index called up 33 points.

Here’s the agenda:

• 9.30am BST: UK inflation report for May
  
• 9.30am BST: UK house price index for April
  
• 10am BST: German ZEW investor confidence report