Sterling Digests Brexit News, UK Rating Downgrade

Cable slipped just after the re-open, as regional players digested Friday's downgrade to the UK's sovereign rating (to Aa3 from Aa2) by Moody's. The agency cited persistently low productivity growth, tepid business investment and uncertainty surrounding the UK's future relationship with the EU as factors weighing on the country's economy in the lead-up to the shock from the coronavirus crisis. GBP/USD has recouped losses thereafter, as e-minis nudged higher applying some pressure to USD, while BBG reported that London is ready to rewrite its controversial Internal Market Bill in a last-ditch attempt to revive talks with the EU.

• The legislation sparked controversy after a UK minister admitted that it would be illegal, which drew the ire of London's partners in the EU and elsewhere. Aforementioned report came after PM Johnson said that he would be willing to resume negotiations with Brussels only after the EU offers concessions.
• Separately, UK Cabinet Office minister Gove told Sky on Sunday that he still wants a deal and the door is ajar if EU chief negotiator Barnier wants to come to London for talks next week, but added that the UK will not accept a deal at any cost.
• Elsewhere, BoE Gov Bailey said that the coordination between central banks and governments has not undermined the central banks' independence.
• Cable trades +6 pips at $1.2922 as we type, with bulls looking to take out Oct 12 high of $1.3083 before taking aim at the 61.8% recovery of the Sep 1 - 23 sell-off at $1.3174. Conversely, a break under Oct 14 low of $1.2863 would open up Oct 7 low of $1.2846.
• Local data highlights this week include inflation data (Wednesday) as well as retail sales & flash Markit PMIs (Friday). BoE speaker slate is quite tightly packed. Broadbent and Cunliffe speak Monday, Vlighe appears Tuesday, Ramsden's up Wednesday, Haldane & Bailey are due to speak Thursday, while Friday will see some more remarks from Ramsden.