Francine welcome to the pulse. Live from bloombergs European Headquarters. First thing is first. Lets check on the markets. This is the picture. A huge scoop from Bloomberg News on what theresa may will are want to do with the city of london. She is refusing to prioritize brexit talks. Lets show you where the pound is. It is falling to the lowest against the dollar since 1985. We have had concern for some of the oil stocks. Markets, we dont have them. Lets get to the bloomberg first word news with nejra cehic. The cleveland fed president says a compelling case for the u. S. To raise rates. She was one of three officials who wanted to hike last month. She repeated her views that the feds november meeting should be considered a live test should be considered live should be considered live for a Rate Decision. T i want to be consistent i want to be consistent with our to medications. With our communications. If we wait until we see the inflation get back to your goal, then there is a higher potential that we are going to have to raise rates on a steeper path. When the fed and other policymakers have done that, it doesnt turn out to be a good outcome. Nejra Australias Central Bank have kept cash rates unchanged at 1. 5 . That was a strong rebound in commodity prices. Decisione first rate over under philip rose. Philip lowe. Ties between the u. S. And russia have deteriorated farther after the Obama Administration the white houseed Spokesman Says everybodys patients with russia has run out. Washington has blamed Vladimir Putin for undermining the donald trump claims he used a tax kobani he can understand. Used a tax codes only he can understand. He maygure so large that not have had to pay income taxes for two decades. Hillary clinton said what kind ingenius loses 1 billion one year you go as a businessman, i have legally used the tax loss to my benefit and to the benefit of my company, my investors and my employers. Brilliantlyhave used those laws. Nejra global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. Cehic. Jra this is bloomberg. Francine the pound is trading at a threeyear low as investors worry about britains exit from the european union. Senior figures in the u. K. Government have told bloomberg that the Financial Services sector will get no special favors and brexit negotiations special favors in brexit negotiations. Morning, michael kennedy. Will kennedy. The, will get to you in second. Simon, congratulations on this massive scoop. What do we know about Theresa Simon speaking to people within the government, it is a bad news data fact that the figures in the governments are saying proved to be the end result. That is unlike the predecessors, gordon brown and David Cameron, theresa may is not enthralled to the city. She is annoyed by some of a loving by some of the lobbying. The assumption is within government is in the end, brexit might cost bank bonuses but it will not cost many jobs. Because itlish talk runs counter to what the banks have been saying. Banks have been saying which is we will move jobs. Francine initial reaction when you read this report this morning . I think it highlights some of the Downside Risks of sterling. That said, i think things are politically likely to go quieter Going Forward until we get to the point where article 50 is triggered. Although we have a downside target, sterling 115. That target is more likely to be met early in the year rather than in the remainder of this year. Francine adam, what was your reaction . Is that pound weakness . Dam it is a bit of both the move yesterday was sterling specific. Today it is about the market repricing, the risk of fed rate hikes and the better u. S. Data. Todays move is more about the dollar. The sterling specific we can expect Going Forward is what gets us to an aggressively low target. That willhat drive crystallize early next year. The politics but the Economic Data flow starts to look worse for us when we start to see the q4 numbers rather than the q3 numbers. The impact of the sterling weakness that we have seen so far, our activity will be a lot more muted. There is a lot of bad news coming down the pipeline for the early part of next year. Francine simon, what are more people worried about . Theresa may dismissed the fact that they were trying to find an interim deal before renegotiating . Or the fact that she doesnt want to safeguard the city of london . Deal. The two years is not the long in the negotiations. They want this interim deal to safeguard the status quo. They were already thinking that it might not happen. They are being told the interim deal that you want is not a high priority for us. Francine adam, what do you think . ,here is a Conspiracy Theory the fact that theresa may is playing hartline. When we is playing hartline. Line. Playing hard is that a possibility . Simon i think it is adam i think it is unlikely. When we start to see the negotiations happening in public when article 50 is triggered, the process is likely to be a lot more difficult and acrimonious than people are expecting. There is no incentive on the part of europe to make the exit process look easy. Expect. Not what we quieter is likely to go until we get to the point where article 50 is triggered. When it is, the whole process is likely to be a lot uglier than expected. Francine simon, how do you square that we have a good data . We had some good manufacturing data with the fact we are looking at a hard brexit . Simon it could be argued that it makes it easier to go for hard brexit. The minute we voted outcome of the nation has been pretty resilient. Out, the nation has been pretty resilient. We can go at it alone with the economy alone, the forecast were incorrect and we should be going solo. Betterger the last, the francine what is your target for pound from here until the end of the year . We have a relatively limited climbed to 125. Back to 115 in the older part of next year. The Economic Data were seeing at the moment in some ways are slightly misleading. The q3 numbers were looking at in many ways reflect decisions taken ahead of the referendum on the widespread expectation. The outcome would be able to remain. I am worried about the q4 data which there was a much cleaner read on post referendum world. Late in dont see until q4, early in q1. I think it is likely we see weakness in the currency indicated for two q4 rather than cute three. Rather than q3. Francine in terms of timeline, one of the speeches were looking at . When are we going to hear from the chancellor or Prime Minister about what brexit means . Simon she has given into the end of march to set the information out. She says she is not going to negotiate out in public. Very critical of people who have negotiated in the public in the past. Be hit that David Cameron maybe a hint that David Cameron did not have the best tactic. We roll into theresa may speaking again tomorrow on foreign the mastic policies. Tomorrow on the mastic policies. On domestic policies. Fx atne adam , head of rbc capital. Were talking at the open the ftse open at 7000, first time insisting months. A short while ago, the ftse 250, this is the index of midcap shares rising to a record. There you go, this is the intraday but to 250, you can see getting 1. 22 1. 2 . Stay with a pulse, plenty coming up. Laura mester thats Loretta Mester says the u. S. Is right Loretta Mester says the u. S. Is ripe for a rate hike. Michael fuchs, well ask him about brexit in the future of the german Banking Sector. Plus, brexit, what really happened . We get an insider view. We will speak to David Camerons former director of communications, craig oliver. This is bloomberg. Francine welcome back to the pulse. Lets get straight to the Bloomberg Business flash with nejra cehic. Nejra which a bank shares are trading higher after yesterdays holiday in germany. Deutsche banks shares are trading higher after yesterdays holiday in germany. Meanwhile, Jpmorgan Ceo Jamie Dimon told cnbc that no reason Deutsche Bank cannot overcome its issues. Pimco says too many Fund Managers are getting their hedges wrong and undermining pension returns. Many managers are currency protections for each asset class while ignoring the opportunity to benefit the way some extent rates correlate with moves in riskier assets. It says it is using a currently by currency approach and so far the outcome has been positive. Abb says it will keep its this vision and continued its division and keep the has been calling for the swiss firm to spin off that business. It also announced it will buy back 3 billion of shares over the next two years. Shares are trading higher. That is the Bloomberg Business flash. Francine cleveland fed president Loretta Mester says the u. S. Economy is ripe for rate hike. The case for a move will likely be strong. Despite its proximity to the president ial election, take a listen. There is a case for moving the rate up gradually, taking another step on that path. There are some people who think you want to curtail that expansion . Not at all. The reason i think it was appropriate to move the rate of by 25 basis point, we want a sustainable expansion. I think moving rates up is consistent with that. Francine running is now is peter kinsella. Joining us now is peter kinsella. When you look at the crossover between emerging markets and the fed, are you expecting one rate hike this year . Peter i think we might get one in december. Francine why take the chance so close to the election . Peter the fed tends to not look at the political cycle too much. I would find it hard to believe they would ignore the potential outcome in the election. Were we to get a trump presidency, quite like the financial markets, they would decline. I doubt they want to throw a rate hike on what would be a difficult situation. Francine why would we see an emerging market i think it has to do with rhetoric that trump comes out with trade. Apex. Will be bad for i think that is the main reason we are scared of a trump presidency. Purely on the protectionist rhetoric we are getting. Francine lets say Hillary Clinton wins and then it is very highly flagged and we have a december rate hike from the fed. What does that mean for markets . Is irving priced in . Is everything priced in . Peter the fed has come from four rate hikes in 2016 to maybe one and maybe one in 2017. The overall path is gradual. That is much better for emerging markets. Consequently, what we hear from investors is they are more relaxed about the outlook for yen and investing. Francine is is still an opportunity . Some countries is it still an opportunity . You have to be country specific. Peter discretion is the name of the game in the coming months. If you look at china, we came into this year thinking hard landing in china, everything is going to blow up. That has not been the case. The Property Market has looked better than the previous case. We are Getting Better than what the case a year or so ago. Some risks remain regarding the debt buildup. Being a bit more discerning, the question of that. Francine peter, think he so much. He stays with us. Peter, thank you so much. He stays with us. This is what we will be talking about with a new governor at the helm, australia and india release their rates decision this morning. , this isoming up next bloomberg. Francine this is the pulse. Still you kept its key rate unchanged. Well get indias decision 30 minutes from now. Peter, both have thank you so much for sticking around. If you are a new central bank governor, you take a little bit of time unless and get to grips with highly thats higher economic rates. Youre still in a world where mobley speaking, nobody really wants to raise rates aggressively. Where nobody really wants to raise rates aggressively. The rba keeping rates on hold at 1. 5 . That makes sense to me. Francine commodities, right yeah oh right . I think it makes sense that they are staying on hold. Why cut rates now . I think it would be best relatedd, the rba as a as a reluctant rate cut her. Rate cut her. The continuity being name of the game, they are happy to stay where they are. I think they will stay there for a while. Francine what about india . Iser what is interesting they kept the inflation target between 2 and 6 . They moved toward this policy into seaboard. It points to a collective and a ratesetting policy which is very good. , we have a 4 ely a rate cut today, maybe 25 basis points. Francine that would be a strong move, right . Peter it would be. They have had a very good month which should lead a rate cut to, maybe 25 basis to much lower put prices. The question really is is there mores group this is there more scope for a more rate cut . Investor. I am an should investors worry on the independency of these Central Banks . Egg new governor is alive is in the the new governor is in line with the old governor. Peter we will see is the answer. Central bankrb governor. Sleep. Governor previously. Looks, on theat back of government pressure, investors will the moment, it should be a reasonably continuous policy. Francine whisking to the South African financial minister we are speaking to the South African finance minister later on, what is your call on rand . Peter given all of the political machinations going on, if you look at stars, it is been an impressive central bank. It has surprised markets with rate hikes over the past 18 months. If you look at rand, it was one of the better performing currencies between march and august of this year. It did really well. The sars was really clever. They all got involved. And politically induced pressure. Political risk is the problem. Francine thank you so much. Coming up, we will be talking to michael fuchs, talking about brexit and Deutsche Bank and german banks. This is bloomberg. Francine welcome to the pulse, live from European Headquarters in london. Just getting breaking news out of the u. K. In the form of the u. K. September construction pmi. Yesterday we had some good pmi figures for manufacturing, construction rising to 52. 3. The forecast was at 49. Can structure desk september construction pmi definitely for the moment defining brexit brexit. Weakest sincehe 1995 against the dollar after there was a bloomberg scoop nt theresa may is failing saying theresa may is failing to prioritize in her negotiations. Lets get to the bloomberg first word news. Cleveland fed president says there is a compelling case for the u. S. To raise rates. She was one of three who wanted to hike last month. Speaking to kathleen hays, she repeated her views that the november meeting should be considered as live even though it is just days away from the u. S. President ial election. The fed should be looking ahead and not just waiting. I want to be consistent with our communications and summary of economic transitions that says a gradual path is appropriate. If we wait until we see the inflation get back to the goal there is a higher potential we will have to raise on a steeper path. In the past when the fed and other policymakers have done that it does not turn out to be a good outcome. Australias central bank has kept the cash rate unchanged at one and a half percent, and unexpectedly strong rebound in. Ommodity prices it was the first Rate Decision under the rbas new governor. Ties between russia and the u. S. Have deteriorated further after the Obama Administration claimed bilateral peace talks over syrias dead and moscow suspended a treaty meant to reduce the risk of nuclear proliferation. Everybodys patients with russia has run out and washington is blaming Vladimir Putins government for undermining the fight against Islamic State and indiscriminate bombing. Donald trump claims he brilliantly used a tax code only he can understand and reform, after a New York Times story said he reported a 960 million largen 1995, a figure so they may not have legally been required to pay income taxes for two decades. Hillary clinton said, what kind of genius loses a billion dollars in a single year . Businessman and Real Estate Developer i have used the tax laws to my benefit and the benefit of my company, investors, and employers. Honestly, i have brilliantly used those laws. Nejra global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. I am nejra cehic. This is bloomberg. Francine lets bring together the biggest stories of the day. Joining me on the phone to discuss brexit, the eu and the future of the Banking Sector is michael fuchs. As always, great to speak to you on the phone. What kind of brexit will we see . We talked about hard or soft, it is clear or we seem to understand speaking to theresa mays allies that she will not fight for the city of london. Speech ofesterdays theresa may, it looks like that she is going for a hard brexit. Will havets it she it, but a hard brexit means while good things for london are not in negotiation anymore. Ofthere is a hard brexit course me understand there will be no possibility for moving people into the u. K. Anymore because she said, we are deciding who is coming in. At the same time, this means for instance the banking passport is gone. If the banking passport is gone some of the banks have to leave the city of london weather theresa may likes it or not. It is her choice. Francine what is your reaction to the timet