FTSE nudges lower as pound gives up some gains

The FTSE started the day in the red, trading lower as the pound strengthened against the dollar and the euro.

But, shortly after the stock markets opened, sterling started nudging lower to trade down 0.03% erasing some of the 1.2% gain from Wednesday when a supportive comment from the European Union's chief Brexit negotiator, Michel Barnier, triggered the biggest rise in seven months.

Brexit continues to be felt across the UK economy and is visible in various bits of economic data including an 11% drop in car production in July - caused by seasonal adjustment and in preparation for stricter emission standards.

Domestic demand fell by a striking 35%, a drop too big to be explained away by a summer sales lull.

US and Canada talk it out

Canadian negotiators in Washington seem fairly optimistic about their trade negotiations with the US and say the two sides are on track to reach a deal by the Friday deadline.

This is the second leg of the North America Free Trade Agreement negotiations and follows on a deal reached between Mexico and the US earlier this week. Two key issues remain unresolved however.

Canada wants to preserve the NAFTA’s existing dispute-resolution system, which provides the option for a neutral panel to deal with issues such as additional trade tariffs on steel and aluminium introduced by the US earlier this year. Washington, on the other hand, wants to be able to sell more into Canada’s dairy market.

If the talks are successful it would ease trade tensions not only with Canada but also signal that there is scope for a negotiated solution on trade between the US and the EU, and US and China.

Dollar firmer ahead of Labour Day weekend

The dollar traded slightly higher against its Canadian peer, up 0.15%, but was also stronger against the pound and the euro, up 0.18% and 0.21%, respectively.

Thursday could see choppier activity than usual as the US gets ready for the three-day Labour Day weekend which will extend into Monday.

This will provide a brief respite for traders ahead of a busy September when volumes and volatility traditionally pick up.