Another Day, Another Vote

Sterling records its biggest daily gains in almost 2 years as MPs vote to rule out no-deal, ahead of today’s vote on extending Article 50.

Previous Day's Market Highlights

Sterling recorded its biggest daily gains in almost 2 years on Wednesday, as markets priced out the risk of a no-deal Brexit after Parliament voted to take this option off the table. Parliament voted twice to rule out any no deal option from the EU, firstly in an amendment to the government’s official motion, then by voting in favour of the amended motion, with both expressing Parliament’s desire to avoid leaving the EU without a deal - though the votes are not legally binding. The pound gained more than 2% against the dollar, reaching its highest levels since June 2018 and rallied more than 1.75% against the euro, reaching a fresh yearly high and briefly trading above the €1.18 level for the first time since May 2017. Although an exit from the EU without a deal on March 29th remains the default legal position, the belief in markets seems to be that this will be avoided by Parliament - either through approval of a deal or an extension of the negotiating period. However, despite the rally, there remain political headwinds and uncertainties for the pound, with the Prime Minister seemingly unable to whip her MPs into voting along party lines. 
 
Elsewhere, the dollar lost ground, falling by around 0.6% to a 9-day low against a basket of peers. The greenback’s fall came against a backdrop of broad strength in other major currencies, though the fall in producer price inflation, a leading indicator for CPI, may have weighed on the dollar. Meanwhile the euro gained, adding more than 0.4% over the day, as upbeat industrial production figures allayed some fears of an economic slowdown. Data showed production increasing at 1% on a month-on-month basis in January, though one data point alone is not enough to gauge whether the economy has turned a corner. The Swiss franc also gained, adding 0.3%, likely due to demand owing to its status as a safe-haven. 
 
Away from FX, European equities traded flat in a quiet session. Both London’s FTSE 100 and the pan-European Stoxx 600 closed unchanged. Across the pond, US markets gained, led by healthcare stocks. The benchmark S&P 500 closed up 0.7%. In commodities, oil prices continued to firm after a large fall in US inventories. Global benchmark Brent added over 1%, while US WTI gained more than 2%.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1730 1.1803 1.1312 4.16%
GBP/USD 1.3290 1.3381 1.2773 4.54%
EUR/USD 1.1330 1.1419 1.1176 1.63%
GBP/AUD 1.8802 1.8851 1.7990 4.57%
GBP/NZD 1.9421 1.9542 1.8660 4.51%
GBP/CAD 1.7691 1.7795 1.6973 4.62%

Today's Market Highlights

Once again the House of Commons takes centre stage today, this time as MPs vote on a motion to request an extension of the Article 50 negotiating period. Expectations are for this motion, requesting a legislative extension until 30th June if a deal has been approved by Parliament and noting that a much longer extension could be required if no deal has been agreed, will pass with relative ease after yesterday’s ruling out of no deal. However, of more interest will be any amendments to the motion, with MPs using these to lay out their ideas for the way forward. Amendments are likely to centre around both a potential 2nd referendum and alternative EU negotiating plans. Reports this morning suggest that a 3rd meaningful vote on the Brexit deal may be held early next week, ahead of the deadline for extending Article 50. 
 
Elsewhere, those looking to economic data for relief from the political world will find it in short supply. No tier 1 data is due from any major economy hence US weekly jobless claims and new home sales are the likely focuses. Both data points are expected to be little changed from their previous release. Also if some interest, though usually with little market-moving potential will be Canadian home price numbers alongside manufacturing PMI data from New Zealand. 
 
Finally, just one central banker is due up, with markets set to hear from BoC member Wilkins overnight.

Today's Economic Calendar

Time Currency Release Consensus Previous
12:30 USD Initial Jobless Claims 225k 223k
12:30 CAD New Housing Price Index (y/y) 0.0% 0.0%
14:00 USD New Home Sales (m/m) 620k 621k
Approx. 17:00 GBP Parliamentary Vote on Extending Article 50