minister the uk prime plans no favor from the city of london over brexit. the pound falls to its weakest 1985.since the cleveland fed president says the economy is right for a rate hike despite its proximity to the u.s. election. we will bring you our exclusive interview. deutsche bank futures it is trading in frankfurt after a long holiday weekend. we'll ask michael fuchs about the government's position on the banks. ♪

francine: welcome to "the pulse." live from bloomberg's european headquarters. first thing is first. let's 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. let's 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 don't have them. let's 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 fed's 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 doesn't turn out to be a good outcome. nejra: australia's 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 everybody's 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 three-year low as investors worry about britain's 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. today's 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 doesn't 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 negotiation's 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 we're seeing at the moment in some ways are slightly misleading. the q3 numbers we're 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 don't 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 we're 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. we're 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 mid-cap 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 that's loretta mester says the u.s. is right -- loretta mester says the u.s. is ripe for a rate hike. michael fuchs, we'll 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 cameron's former director of communications, craig oliver. this is bloomberg. ♪

francine: welcome back to "the pulse." let's get straight to the bloomberg business flash with nejra cehic. nejra: which a bank shares are trading higher after yesterday's holiday in germany. -- deutsche bank's shares are trading higher after yesterday's 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 -- it's 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 presidential 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: let's 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. we'll get india's 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 that's higher economic rates. you're 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 more's 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. let's 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. presidential 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. australia's 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 rba's new governor. ties between russia and the u.s. have deteriorated further after the obama administration claimed bilateral peace talks over syria's dead and moscow suspended a treaty meant to reduce the risk of nuclear proliferation. everybody's patients with russia has run out and washington is blaming vladimir putin's 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: let's 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 may's allies that she will not fight for the city of london. speech ofesterday's 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 timetable? we finally have the timetable and it is pointing for the moment to a hard brexit. do you think a reversal to take place or a softening stance from the eu or u.k. side could come? michael: the timetable is now clear. she said it will be march next year when she is going to trigger article 50 of the lisbon treaty. necessaryd, this is that we really come up to a clear point. it will be interesting how the parliament is going to decide because parliament, according to my understanding is not really pre-brexit.

there are more remainders in the parliament and we will see the discussions going on. as a matter fact, have to face the realities and may was very clear that she is going to trigger article 50 in march next year, and we will see what is coming out. in and out ishis out, and that is something she has to understand. she cannot have all the benefits of the common market but at the same time not accepting the rules of the common market. francine: you know politics like no one else in europe. what do you see the u.k. becoming in four to five years? what will happen to the city of london? last time you were on you are very tentative and diplomatic saying for the moment the city of london is in london so let's not speculate, but can some of the jobs moved to frankfurt if this country is looking for a hard out from the eu? michael: definitely, it will

harm the london market if the banking passport is gone. that is normal because actually the banks have to move their offices into central europe or even into dublin, for instance. this is going to harm the city of london. there are going to be quite some jobs that will be transferred. i know some banks already have hired a lot of lawyers in order to see what kind of technical things they have to do, and now even some banks are running around frankfurt to find some offices, or even to build houses over there, office buildings over there. this is going to be an interesting story, but i am afraid she is underestimating the situation a little bit, because one thing is very clear. the europeans are going to be tough negotiators as well as the u.k. is. francine: talk to me a little

bit about deutsche bank, is this a real nemesis for angela merkel in an election year? so,ael: i do not think because first of all i have a feeling that it is a lot of speculation and i not happy because that speculation does not have to nobody. deutsche bank is quite well stable at the moment. they have a balance sheet of 1.9 trillion and have quite some reason of desperate reasonable liquidity. these old -- reasonable liquidity. these old stories we face within the american government and justice, this is an old story, it is eight years ago, but they have to face the reality and they have already done provisions in their balance sheet to pay these amounts of money. they are capable to do so, so i'm not so worried about deutsche bank. deutsche bank is reasonably

build it at the moment and they are doing a good job to cope. francine: if deutsche bank needs to raise capital, what is the most likely way they will do it or is it speculation at the moment? michael: i think it is speculation because the liquidity of the deutsche bank is picking up to go along with all these problems. i do hope they are going to make a good job in order not to raise capital at the moment because it is not a good idea. francine: there is concern about the german banks and you state that is kind of speculation is no good. make me understand, what kind of speculation are you talking about, speculation on the market? michael: hedge funds are all working on it, putting mr. soros , everybody is doing some kind of speculation. some speculators may burn their ingers quite heavily because am quite sure that deutsche bank is strong enough to come along

with that situation itself. fuchs, asmichael always speaking to us on "the pulse." joining us on the phone from germany. unleashing demons, the inside story of brexit. we will speak to david cameron's former rector of communications, craig oliver. clinton andas trump's running mate's are preparing to debate. we will speak to kit juckes about the tumbling pound. ♪

francine: market a little bit mixed this morning, let's head straight to the bloomberg with nejra cehic for your asset check. nejra: the dollar is up against the yen for a sixth day but what i am focusing on is happening in the european markets, the stocks 600 up a 10th of 1%, broad-based gains across the region. let's take a look and see what is happening in terms of sector health. energy stocks leading the gains up one and a half percent followed by materials, up 1.3%.

financials up 7/10 of 1%. autsche bank getting for fourth straight session as we saw it hit a record low twice last week. 100, thisto the ftse opened above 7000 for the first time in 16 months. the highest level since may 2015. the white line i have tracked to the 7000 and the green line is the record level it hit back in april 2015, and it is within 1% of that. the ftse was up some 1.2%. a lot of what has been driving this has been the weaker sterling because if you look at the ftse 100 in pounds versus dollars, a big discrepancy. in localined some 13% currency but declined whether 2% in dollar terms. that is the biggest underperformance since the global financial crisis. a lot of the gains in the ftse

,art of the sterling effect sterling back down below its post-brexit low. 1.27, the lowest since 1985. francine: before being called to work at number 10 downing street with david cameron, my next guest was a senior manager with rbc. let's welcome craig oliver, former director of communications to david cameron and author of this book, unleashing demons, the inside story of brexit. you have a very short window to write it. craig: everybody was talking about the referendum being the biggest event in u.k. history since world war ii so i kept detailed notes and a diary of that time, so when a publisher talk to me i was able to use

that material but it took me about 10 solid weeks of writing. to explain one of the most multimers times in british politics recently, and what mistakes did we make. francine: what was the biggest mistake? as an insider you probably have as someoneer grasp sitting at home or on a trading floor. craig: what james carville said in the first clinton presidential campaign, is the economy stupid? many economists have used that as an iron law and we put all of our chips on the belief that economic risk to london would other argument. when immigration came to the floor it overtook it. we also believe that millions of people who have not engaged in the political process for years would not do so this time. they did in huge numbers for

leave and that was enough to take it over the line. francine: do you think david cameron regrets calling the referendum? day in and day out your newspapers bashed europe so for me it felt counterintuitive that you could win the referendum. craig: a lot of people did -- it has become inevitable in our political system you have rebellious mps rebelling on anything to do with europe. the uk independence party was doing well but they won the elections in 2014. you also had the so-called democratic deficit meaning you needed to be 60 two vote on europe. of the eu, i think it is also true exactly the point you are making, for 40 years nobody had really done positive

pr for the eu so when it came to a referendum it was difficult. i think that was an issue across europe with marine le pen, other things going on across europe, a lot of european leaders may face that as a problem going forward. francine: that brexit referendum happening, and this is an amazing read. it also makes you understand the people involved with the possible negotiations from now going forward. we have this bloomberg's group saying british financial companies will get no special favors in the referendum negotiations. this is a stark contrast with what david cameron would have done. craig: you are seeing a real tension in the british government at the moment so there will be people like that that are saying that. there will also be others who are arguing against that so i suspect philip hammond, look at his speech yesterday.

i think he would not be saying that. britain are seeing in at the moment is the irresistible force of people who say we must end freedom of movement and stop immigration. the immovable object, our economy relies on do we have financial passporting, a report of the single market. that is a tension something has got to give an a lot of people will scream betrayal at the end of it. 11,cine: there is number number 10, and the three brexiteers. how does that play out? craig: i think there is a tension among people who believe we can become a country like singapore, and others who are saying europe is our biggest market, we have probably no better deal. francine: but this is what you voted for. i think the reality of

what theresa may is doing, she is trying to hold together something that is very difficult. people who want a complete end to free movement and people who say we must have the best deal possible, and that is where politics will be fascinating. it is really interesting having worked in the center of politics and explaining to people in the city and saying, the logical financiallyis this, the best thing for the country is this, but sometimes politics trumps economics. sometimes politics says it is not survivable for the government to behave in any other kind of way. francine: i am expecting a sequel but please come back on the program. former director of communications to david cameron. up next, the spotlight turns to the running mates in the u.s., live from new york as tim kaine and mike pence prepare for the

one and only buys presidential debate. this is bloomberg. ♪

francine: welcome back to "the pulse." let's get straight to the bloomberg business flash. nejra: deutsche bank shares trading higher after yesterday's holiday in germany following a report on friday that the embattled german lender is nearing a $5.4 billion

settlement with the u.s. justice department. dimon toldo jamie cnbc there is no reason deutsche bank cannot overcome its issues. share 3000tends to jobs as part of a cost-cutting program. place inwill take administration. consultations about the changes are ongoing. --flix rose to list highest rose to its highest since may and that a takeover talk. netflix to linked disney although analysts see little chance of a deal. netflix the want -- declined to comment. francine: hillary clinton and donald trump's running mates are getting ready to take center stage in the first and only

presidential -- vice presidential debate. people really care? i know they are number two in charge but when you pit them against hillary and donald, it is not the same. michael: especially personality wise, although these two men are more popular than their running mates according to the polls. very few people know them and poll shows 40% of americans cannot name the candidates for vice president. will be introduced to mike pence, the republican governor of indiana and tim kaine, the democratic senator from virginia who was also the governor. ordinarily in vice presidential debates, two men play attack dogs so it could get very interesting because there is no good blood the between hillary and donald trump. mike pence will be asking about e-mails and taxes will probably come up from tim kaine.

ruledday a federal court his decision to bar syrian indiana was not legal. trumpne: how is responding to the week of his tax returns? michael: he is going on the offensive, gambling may be that he can turn it on its head saying, of course i used the tax code and i used it brilliantly. he said he exploited the tax codes legal provisions to protect his investors and family. what he does not explain how massive business losses ended up on a personal return, that may be the subject for the next presidential debate. francine: i'm looking forward to all the debates. michael mckee in new york.

"surveillance those quote is up next. andkeene will be joining me we will be talking about weakness iran and some of the investigations -- weakness in rand and political turmoil of south africa. ♪

francine: the uk prime minister plans no favorites for the city , the poundmid brexit falls to its lowest level since 1985. the cleveland fed president said the economy is right for a rate hike next month despite its proximity to the u.s. election. economy,ica's ailing we speak to the finance minister as the risk of a downgrade and political turmoil way on the country. this is