The terminal. 57. 4. Withigure bang in line earlier estimates. A strong figure if you look at the pmi manufacturing figure five yearsst four or or so, that is equal to the high of a couple of months ago. So, manufacturing going from strength to strength. 57. 4, the actual figure 57. 4. Sets us up nicely for the ecb meeting on thursday, backing some view that the economy is Strong Enough to weather the beginning of the normalization of of ecb policy. Check out what is happening with European Equity markets. We are on track for a weekly gain. Weve been alternating on a weekly basis for the lesast six. Infell for a third month august. Worst losing run since february 2016. The u. S. Jobs report. The euro is down against the dollar today. After rising for six out of the last eight weeks. Be question will be well asking our first guest of the hour is has the dollars fortune changed . To. 10year yields, fell 2. 11 , lowest since november. Est month for the u. S. 10year talking about falling yields in august. Is the bond market telling us the u. S. Economy is in good enough shape to warrant another hike in Interest Rates this year . The fed meets in september as does the ecb as does the boe. . Ude oil is down 1 , just 2. 8 yesterday it is down 2 this week. Tropical storm harvey is crimp ing crude processing. The flipside is gasoline futures have risen this week. Lets get to first word news. Sebastian President Trump is considered attaching an increase in the u. S. Debt limit to a funding request for Hurricane Harvey. 5. 5 million will go to fema 95 going to the Small Business of ministration. To Small Business administration. Theresa may is coming under pressure after the latest round of talks ended in a stalemate. Unions negotiator says that britain is refusing to fill its obligation. The london mayor says that the government needs to get its act together. I think the Prime Minister in the cabinet have got to raise their game. Ive been saying for a while to make suregot they negotiate in good terms in positivity with the e. U. In china, there is more evidence the economy may remain robust enough to continue coming financial risks. Manufacturing top estimates, the third consecutive month of expansion. 1 afteran peso fell the economy minister says the nation needs to prepare an alternative to the north American Free trade agreement. Talkscond round of nafta resumes in mexico city with President Trumps rhetoric expected to figure prominently. He threatened to pull out of the deal four times. Global news 24 hours a day powered by 2700 journalists in 120 countries. This is bloomberg. Mark thanks. We get the latest reading on the u. S. Employment market later today. Analysts expect 180,000 jobs to be have been added in august. The trend this year is for numbers to come and higher than expectations with the nonfarm payroll topping forecasted 57 months. August has undershot expectations for the last six years. Investors will also be scouring the report for any clues on how it might influence the feds thinking on the rate path. Ats bring out fx researcher credit agricole. Is average Hourly Earnings your key focus . Good morning. Yes, indeed. That will be part of the payroll support. Indeed, investors will want to know will there finally be improving Market Conditions . We had a lot of discussion in recent weeks about how the phillips curve is working in the was of the u. S. , how that released just before jackson hole arguing that we should not be using the phillips curve anymore. With all of that focus, i think the average Hourly Earnings growth will attract have greater importance this time around, especially if we do see some evidence for that growth accelerating. Mark if we see a pick up in Hourly Earnings, might it peril the dollar sentiment is turning. We saw the low, lowest since january 2015. Bit of a bounce this week. Are we witnessing a turn . It is a game changer and a whole debate about the phillips curve. I mean, im not saying it will certainly alleviate concerns at the fed that, despite the accommodations and the tightening and improving labor Market Conditions that Wage Inflation remains elusive. If that comes and then we hear from deadly next week that that was a Welcome Change in the overall picture, you could easily imagine investors rate fed. By the for the moment, we are pricing 40 . Mark by december, 33. 8 . Wellt the it is still below the 50 mark. The point being the markets are still quite skeptical the fed can deliver on the dot plot. From that point of view, saying that, indeed, that the payroll today could indeed help the dollar regained more ground across the board. Mark the fed meeting in september. Balance sheet reduction. I guess the market message on that is fairly mixed. The dollar is coming from a stretch of weak performance or underperformance. Treasury yields are testing the lows. It does not seem like the market is expecting any change yet. However, i still think that, given how the ducks are lining up, Political Risk debating around the debt ceiling and at the same time hopefully wage growth accelerating, you think the fed may muster the courage to go ahead. Mark what is the market telling us with yields its difficultnt, to reappear yes, yields are very low. Behind that may be an interesting flow story developing over the summer. The accelerating Global Growth on the back of improving trading curve conditions are filing big exporting nations like china. It is all these trade dollars having to go somewhere. The reserves are invested into the treasury market. This much may be explaining why treasury yields are so low, despite being on the verge of the fed announcing the unwind of their Balance Sheet. From that point if you, i would not be finding any comfort in the fact that yields are so low. Ultimately, we could have that decision as soon as september. The ultimate course of treasury yields is on the outside, supportive of the dollar. Mark head of g10 fx research at credit agricole. Stay with surveillance. Of london says theresa may and her cabinet need to get their act together as the latest rounds of brexit negotiations end in acrimony. Plus, the latest data shows eurozone inflation is being driven almost entirely by energy. Where does that leave draghi as they head towards their next policy decision on thursday . What a week we have got next week. This is bloomberg. Mark lets get back to Bloomberg Business flash. Against theoing grain and raising its fees by 5 per 100. The move which comes into effect next month will bring the cost for institutional cost shares to 50 per 100. Has reported secondquarter sales that beat analyst estimates. As2. 77 billion euros continue growth at universal music offset pressure on its pay tv unit. Parting ways with the head of after the companys initial round of programs failed to catch on with audiences. Spotify says it will now focus around its popular playing list and other features. Thats the Bloomberg Business flash. Mark so, Prime Minister theresa may is under pressure after the latest brexit talks end in stalemate in a money. The e. U. Negotiator says britain is refusing to acknowledge his financial obligation. The u. K. s crescent secretary urged the brexit secretary urged the e. U. To be more flexible. He Prime Minister and her cabinet have got to raise her game. Members ofily with the british cabinet. I have been saying for a while they have got to make sure you negotiate in good terms with a sense of positivity with the e. U. Mark the hard of the head of g10 research at credit agricole. Summing up the month of august, this is pound top an pounddollar. Worst month since october. The pound index had its worst month. How much more bad news is there out there . My view is that a lot of negatives are already in the price. So, projecting further, sterling underperforming against the dollar, against the euro has to assume something close to a disaster. The eventual outcome of the brexit mark you cant be encouraged by the talks, the lack of progress. The extent in which the two parties are trying to talk their position as they have to reach a point where they have to make a decision and a decision will be made. That is my into rotation of what is happening. By now its clear that the ak. Will be the budget as bargaining chip in exchange for a new relationship with the e. U. Down the road. It is uncertain to how the e. U. Will use that as a bargaining chip down the road. Following the german elections, now i think there will be more clarity on both the positions of both. Im not that really concerned about what has been happening. Its not helping the pound. But want i want to warn against is that time and time again people talk about pure sterling parity. It is the case that the fx market, being the most liquid of all, they tend to overshoot. Mark you dont think it will overshoot to parity, do you . To justify a move to parity, you have to have a severe supply shock to the u. K. Economy. It has to assume a balance of payment crisis. These are not my sometimes. I cant subscribed to that view. It is the highest you can get. On the base of those assumptions could be 95. Theoint again being that fundamentals are much more slowly moving than the fx markets. So, at some point, fx markets push to unreasonable levels. And they have to wait for the fundamentals to justify those moves. We may be reaching the point where some. Justification may be needed make of theid you comments that said the brexit risk do not justify this record low Interest Rate. He is one of the two whos voting to change rates. Do you see any big shift within the boe, given the continuing weakness of the economy . Saunders has been relatively hawkish, relative to the view of his colleagues. So far, there is little to indicate that the hawkish minority at the mpc will be growing anytime soon. There is still time to november or february next year. Unless the data deteriorates significantly further, the boe will be on to renew pressure to remove at least some of that, monetary easing in the immediate aftermath of the e. U. Referendum vote. Andfrom what i can tell looking of Business Confidence indicators, investment intentions, hiring, y es, they are not painting a very rosy picture. At the same time, this is still an economy of full employment and potentially peaking inflation at some point which supports the real purchasing power of the uks consumers. Side with would Michael Saunders on that. I think the boe may indeed be in position to hike rates before long. Hikes dismissive of any anytime soon. Clearly the pound will be playing a role in that. My point being as an investor i continue to see potential rate hike from the boe as a way mark carney in october when the pound index was at these levels said we are not overlooking the weakness of the exchange rate. Might we get similar comments soon . If it continues. It is the case that what we have been seeing for the last 10 years in the markets, there is the market for the Central Banks. The case being if a central bank makes, take a certain view on the economy, the markets like to challenge and push it to a point where they have to deliver. We like to call this calling the bluff of the central banker. Carney wast that saying that they may hike rates, encourage the markets to call the bluff and say, we will sell the pond until you do so. In the extreme world, you think the markets may be driving the Central Banks decision. Its reached the point that if the pound continues to selloff, that may indeed force the bo es hand. That is one tool they have to defend the currency. Mark staying with us. From credit agricole. Draghi and the edata. The latest eurozone inflation figures show Energy Prices the driving price gain. Will that prompt more caution as the ecb meets. This is bloomberg. Mark you are watching bloomberg surveillance. The ecbs latest policy decision thursday. Mario draghi yet another piece of evidence that advocates caution when officials discuss their plans. Inflation data yesterday showing only energy has affected the driving price gains, accelerating growth. As it beat forecasts, the trend is far from entrenched. This is a great shot. 47. 15. Which shows the output gap. Which has narrowed. But this is super core inflation and it includes the categories of prices that relate to the amount of capacity in the economy. As we can see there, it is showing few signs of life. Is the big issue right now . It is the issue. Because if you want to taper q. E. To arrestntroduced the inflation expectations. If you now want to remove that, you have to make sure that the outlook for inflation is not deteriorating. So, it would help the ecb if core inflation what is improving, because it adds credibility. The problem is there is not evidence of that happening anytime. The problem is even greater if you consider other economies like the u. K. And the u. S. Which are at full employment,capacity. And yet, core inflation cannot go higher. Right . The problem for draghi is pretty certificate. Pretty significant. Mark what worst as he used to appease all parties . I think he will manage, be fairly successful if he does deliver on the. But a couple of things. One is, given the price action any fx markets, i believe that eurozone projection inflations will be revised down. I think draghi will be make sure to blame it on the euro, because that what is driving the inflation projections lower. That could ultimately translate into more aggressive jawboning thatn were used to seein ghim doing. The other component will be the vaguensness about q. E. Tape. Draghi may indicate that the ecb has been deliberating beyond here end and could reiterate his comments from sintra that now that the economy is improving it may need less stimulus them before. He fall well short of indicating that taper is coming. He will try to delay any indications of any concrete details until later in the year. From that point of view, if that is what you get and you have been buying euros like there is no tomorrow for the last three months or so, you may want to be cautious on that position. I think that net result, going into the ecb meeting would be some unwinding mark buy the euro. Ultimately, if you look at the bigger picture. The messages we have no choice. They have to taper q. E. This much is a positive for the euro. G10 research at credit agricole. The latest brexit talks ended in stalemate. We are going to talk to a former negotiator in europe. This is bloomberg. Mark welcome to our weekly brexit show. Im mark barton. Lets get around above the weeks big brexit news. Sebastian brexit talks resume this week with the European Unions chief negotiator accusing the u. K. Of not being serious about his withdrawal from the bloc. To be honest, im concerned, time passes quickly. I welcome the u. K. Governments paper and we have read them very carefully, very carefully. But we need u. K. Positions on itseparation issues, necessary to make progress. Sebastian the flurry of position papers came under fire from brussels. The European Commission president accused the u. K. Of not being prepared for the meeting. Read all the position papers produced by her majestys government and none of them is satisfactory. There is still an a numerous amount of issues that remain to be settled. Theresa may arrived in japan on wednesday as she starts a threeday visit. Prime minister abe said he was encouraged by pledges from the u. K. Leader after he pressed for a predictable british break away from the e. U. To reassure japanese investors. Global news 24 hours a day powered by 2700 journalists in 120 countries. This is bloomberg. Mark . Mark lets get some breaking data out of the u. K. Pmi manufacturing is spending at the strongest pace in four months in august, lifted by export orders and domestic demand. A measure of factory output rising just to 56. 9 from a revised 55. 3 in july according to ihs. The market exceeds the 55 forecast by economists in a bloomberg survey. Companies reporting the strongest intake of new order since may bolstered by the weak sterling. The currency depreciation also contribute to Purchase Price gains accelerating for the first time in seven months. At a slower pace thats seen at the start of last years referendum. Sparking the plunge in the currency. Making it more competitive as well is driving up the cost of imported goods. Overall, Economic Growth is slowing the first half as Consumer Spending stalls. Some boe policymakers are calling for a rate increase to keep the lied on above target inflation. U. K. Manufacturing accelerated to a fourmonth high. We are getting a little bit of a push upwards in sterling. 1. 2931 against the dollar. Brexit negotiations have ended without sufficient progress being made according to the e. U. Negotiator during a combative press conference alongside his u. K. Counterpart david davis. The stumbling block is over money. Barneys team wants an agreement on how much been will pay towards its commitment to the e. U. The u. K. Wants to move on to talking about future trade deals before revealing its hand. Lets continue to Work Together constructively for the people above process. As discussions in june, july begin our separation from the European Union and our future relationship is inextricably linked. We can only result some of these issues with eye on how this new partnership will work in the future. It is not about skipping ahead or trying to reopen previous discussions. Its about pragmatically driving the process we all want to see. Mark a former negotiated for the u. K. In the e. U. He joins me from brussels. Thanks for joining us today. Are you surprised that the talks made little progress this week . Im not hugely surprised. I am very surprised and astonished that the u. K. Seems to have mo